WASHINGTON – U.S. construction spending staged a strong rebound in July, rising by the largest amount in more than two years. All major categories of construction showed gains in an encouraging sign that spending on building projects will help boost the economy in the second half of this year.
Construction spending rose 1.8 per cent in July, the biggest one-month gain since May 2012, the Commerce Department reported Tuesday. It followed a 0.9 per cent decline in June, the largest setback in a year. That decline had been blamed in part on soggy weather which depressed construction activity in many parts of the country.
The July rebound pushed total construction to a seasonally adjusted annual rate of $981.3 billion, the highest level since December 2008. Spending on housing, non-residential and government projects all increased.
Construction spend is now 8.2 per cent higher than it was a year ago as it continues to advance following a deep plunge during the Great Recession when builders sharply cut back because of a glut of unsold homes.
Housing construction was up 0.7 per cent in July to an annual rate of $358.1 billion after two months of declines. Spending on single-family homes rose 0.5 per cent and is 9.4 per cent higher than a year ago while apartment construction rose 0.2 per cent and is 41 per cent higher than a year ago.
Spending on non-residential projects increased 2.1 per cent to an annual rate of $343.6 billion with the strength led by gains in hotel construction, electric power transmission and manufacturing.
Spending on government projects rose 3 per cent, the largest gain since October. Spending on state and local projects was up 3.4 per cent, offsetting a 1.1 per cent drop in federal construction spending.
A slump in construction in the winter contributed to the economy, as measured by the gross domestic product, shrinking at an annual rate of 2.1 per cent in the January-March quarter. That was the biggest plunge in GDP since the first quarter of 2009 during the depths of the Great Recession.
But the economy rebounded sharply in the April-June quarter, growing at an annual rate of 4.2 per cent. Economists think economic growth will continue at a solid pace in the second half of this year although an initial forecast of 3 per cent growth in the July-September quarter may be trimmed following a report Friday that consumer spending fell in July. Economists remain optimistic that Americans will resume shopping in coming months, helped by rising employment and stronger consumer confidence.
In the spring, residential construction grew at a 7.2 per cent rate after two quarterly declines and spending by businesses on construction projects rose at an annual rate of 9.4 per cent.