Labor Shortages, Material Costs, Cause Construction Stumble in June

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Construction spending fell unexpectedly in June.  The U.S. Census said overall spending was
down 1.1 percent from the May estimate to a seasonally adjusted annual rate of $1.332
trillion.  Spending was still higher, by
6.1 percent, than the June 2017 annual rate of $1.241 trillion.  The loss was somewhat mitigated by a
substantial revision to the May numbers. 
Originally estimated at a rate of  $1.310 billion, an 0.4 percent increase from
April, the total was revised up to $1.332.2 billion, a healthy 1.35 percent
gain. 

Analysts had expected a small gain in June.  Those polled by Econoday reached a consensus
of an 0.3 percent uptick, although the estimates ranged from an 0.3 percent
loss to a positive 1.1 percent.

On a non-adjusted basis total construction spending in
June was $118.896 billion compared to 115.517 billion in May, but year-to-date
(YTD) expenditures through the first half of the year are 5.1 percent higher
than the same period in 2017, $619.881 billion versus $589.638 billion.

Privately funded construction came in at an annual
rate of 1.019 trillion, down 0.4 percent from May but 6.5 percent higher than
the previous June. The YTD spending on private construction was up 5.2 percent,
$485.083 billion compared to $460.919 billion in 2017.

Residential spending was also down, 0.5 percent for
the month to a seasonally adjusted annual rate of $568.295 billion, 8.8 percent
higher than a year earlier.  On a
non-adjusted basis there was $51.878 billion in residential construction put in
place during the month and YTD spending is up 8.3 percent to $266.463 billion.

Both single-family and multi-family construction moved
lower in June, single family by 0.4 percent to a rate of $287.416 billion, and
multi family was down 2.8 percent.  The
rate of single-family construction is running 
6.8 percent ahead of the June 2017 rate while multifamily hung on to a
1.8 percent gain.

YTD spending for single-family houses was $134.872
through the end of June, and multifamily totaled $29.616 billion.  That put spending on single-family
construction thus far in 2018 up 9.0 percent, but multi-family trails the YTD in
2017 by 0.7 percent.

Publicly funded construction was at a seasonally
adjusted rate of $297.443 billion in June, down 3.5 percent from May and lagging
June 2017 by 2.5 percent.  The annual
rate for publicly funded residential construction was $6.525 billion
annualized, 3.7 percent behind May expenditures and down 2.5 percent for the year.

Econoday’s commentary on the data attributed part of
the weak construction spending number to shortages of construction workers,
especially skilled labor, as well as high prices for construction materials.
The weakness in spending in the residential sector, it says, will continue to
limit buyer choices and overall home sales.



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