The U.S. Commerce Department reported on Oct 1 that domestic construction spending picked up in the month of August. Such an increase was achieved on the back of higher government spending, which touched its highest level since 2009. Further, a steady increase in expenditure on new federal, state and local construction projects made up for the decline in private construction activity in August.
Although the metric came in below expectations, it showed a steep rise on a year-over-year basis. This indicates that construction activity in the United States remained largely unperturbed by increasing geopolitical tensions. Under such encouraging conditions, investing in mutual funds with significant exposure to construction companies seems judicious.
Construction Activity Nudges Up in August
Construction spending in the United States increased by 0.1% in August. The figure came in lower than the consensus estimate of an increase of 0.4%. However, the August figure increased 6.5% from the same period last year. In fact, through the first eight months of the year, spending was 5.3% higher than in the same period of 2017.
Residential and non-residential construction spending declined 0.7% and 0.2%, respectively, in August. However, these declines were offset by a robust 2% monthly gain in public construction spending, which hit a nine-year high.
Factors Supporting Growth
In August, expenses on federal government construction programs increased 5.9%, to hit its highest level in the last 10 months. Local and state government construction spending surged 1.7%, to its highest level since March 2009.
From the non-residential domains, only construction outlay for office buildings moved up 0.8% month over month in August. Meanwhile, builders continue to witness robust demand for new homes, buoyed by a steady increase in the number of job additions as well as income growth. Sales of new single-family homes in the United States rebounded in August, exceeding the prior month’s reading by 3.5%.
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