Construction Spending Drops Slightly in June

WASHINGTON D.C. — June construction spending dropped slightly from May figures, according to a report released Monday by the Commerce Department.

June’s numbers came in at $1.093 billion, 0.3 percent below the revised May estimate of $1.096 billion. The June figure is 7.9 percent above the June 2004 estimate of $1.013 billion.

“Although recent numbers have been a bit sluggish, there are plenty of indicators that activity will gain momentum in the second half of 2005 and beyond,” Ken Simonson, Associated General Contractors of America chief economist, said. “Friday’s report on gross domestic product showed that consumers, businesses, and governments all are spending on investment. The enactment of the highway and energy bills should give a long-term boost to several types of construction.”

Simonson added, “Today’s report from the Institute for Supply Management (ISM) confirms individual company reports that manufacturers are in good shape to add factories. Many states have reported large increases in revenues that will allow public construction spending to expand over the next year or two.”

Spending on private construction was at a seasonally adjusted annual rate of $843.8 billion, 0.2 percent below the revised May estimate of $845.6 billion. Residential construction was at a seasonally adjusted annual rate of $602.4 billion in June, 0.4 percent below the revised May estimate of $604.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $241.4 billion in June, 0.2 percent above the revised May estimate of $240.9 billion.

“Private residential construction is likely to shrink gradually over the next year,” Simonson said. “But there isn’t likely to be a crash. Long-term interest rates are still remarkably low and builders remain optimistic, with large backlogs of unused permits.”

In June, the estimated seasonally adjusted annual rate of public construction spending was $249.2 billion, 0.5 percent below the revised May estimate of $250.3 billion. Educational construction was at a seasonally adjusted annual rate of $64.6 billion, 1.2 percent below the revised May estimate of $65.4 billion. Highway construction was at a seasonally adjusted annual rate of $67 billion, 0.4 percent below the revised May estimate of 67.3 billion.