Fiscal Stimulus Lifts Construction Spending in June
The major data news this morning is the improvement seen in the sentiment-based ISM Manufacturing Index, a private industry survey, but it’s helpful that hard data is backing up sentiment as construction spending unexpectedly improved in June.
Against expectations that construction spending would fall 0.5% in June, following a 0.8% drop in May, the actual figure rose 0.3%.
“We may finally be getting some boost from fiscal policy,” noted economist Joseph LaVorgna from Deutsche Bank as he pointed out that public construction advanced 1.0% in the month, but private construction declined 0.1%.
“For construction spending, all the signs are there that we've pulled back and that we are on the verge of growing again,” added Jim Awad, managing director at Zephyr Management.
BMO economist Jennifer Lee noted June marks only the third increase in the past twelve months. “Gains were had in both the residential and non-residential sectors, a combination which, like the headline, has only happened three times in the past twelve months,” she added.
If the ISM report, released at the same time, is broadly correct for July, then construction spending could see continued gains in the third quarter.
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