Tags: Construction | Spending | Economy | Growth

Construction Spending Stalls, May Prompt Growth Downgrade

Tuesday, 01 July 2014 10:10 AM

U.S. construction spending rose less than expected in May, which could prompt a further downgrading of second-quarter economic growth estimates.

Construction spending edged up 0.1 percent to an annual rate of $956.1 billion, the Commerce Department said on Tuesday. However, April's construction spending was revised up to show a 0.8 percent rise, taking some of the sting out of the report.

Economists polled by Reuters had expected construction spending to advance 0.5 percent after a previously reported 0.2 percent gain.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

Meanwhile, the ISM survey showed weak export orders and a jump in imports, indicating trade would again be a drag on growth in the second quarter.

The data was the latest to suggest the economy's rebound from a brutally cold winter could fall short of expectations. Growth contracted at a 2.9 percent annual pace in the first quarter, also weighed down by a slow pace of inventory accumulation by businesses.

Economists last week slashed their second-quarter growth estimates after weak consumer spending in May. Growth forecasts are now running as high as a 3.5 percent pace and as low as a 2.1 percent rate.

Construction spending in May was held back by a 0.3 percent decline in private construction projects, which offset a 1.0 percent rise in public construction outlays. Private construction is the largest portion of construction spending.

Private residential construction tumbled 1.5 percent, reflecting weak housing starts.

A run-up in mortgage rates has stymied the housing market recovery. Investment in home building and nonresidential structures such as factories and gas pipelines contracted in the first three months of this year for a second straight quarter.

Spending by the federal government dropped 8.9 percent, the largest fall since December 2010. State and local government projects increased a solid 2.0 percent.

Meanwhile, U.S. manufacturing activity held steady at firmer levels in June and automobile sales were on track to beat expectations.

The Institute for Supply Management said on Tuesday its index of national factory activity was at 55.3, little changed from May's 55.4 reading. A reading above 50 indicates expansion.

The forward-looking new orders subindex hit a six-month high, but factory employment was unchanged.

"Manufacturing has gathered some momentum in the second half of the year. That’s an important pillar for the economy along with housing. The details are better with new orders rising," said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Separately, early sales reports indicated the auto industry overall had a better-than-anticipated showing last month, even though there were two fewer selling days than a year ago.

General Motors bucked Wall Street's low expectations and negative publicity over a flood of safety recalls, reporting a modest rise in U.S. sales in June.

Chrysler Group and Nissan Motor also reported year-to-year increases on Tuesday. They, along with Ford Motor, topped analysts' expectations.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse .

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U.S. construction spending rose less than expected in May, which could prompt a further downgrading of second-quarter economic growth.
Construction, Spending, Economy, Growth
Tuesday, 01 July 2014 10:10 AM
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