US construction spending fell on housing, public works

US construction spending fell once again in August, driven mainly by lower public construction combined with growing weakness in the housing market as the Federal Reserve has been boosting lending rates to quash inflation.

Construction spending during August 2022 was estimated at a seasonally adjusted annual rate of $1.781 trillion, 0.7pc below July's revised estimate of $1.793 trillion, which was off from a $1.8 trillion pace in June. August's figure remains 8.5pc above the August 2021 estimate of $1.64tn.

Private construction was at a seasonally adjusted annual rate of $1.43tn, 0.6pc below the July estimate of $1.44tn. Within that, residential construction was the main driver of the decrease, falling 0.9pc to $913bn in August from July's estimate of 922bn.

New single family home construction was at a $436bn annual rate, a 2.9pc fall from July and practically on par with August 2021.

The US housing market has seen continued pressure in recent months as the Fed has pursued aggressive efforts to tame stubbornly high inflation. The most recent rate increases have pushed the average rate on a 30-year fixed-rate mortgage to 6.7pc in the week ended 29 September, up from 3pc a year earlier, according to Freddie Mac. This has dried up demand for housing and is beginning to push sales prices lower after a two-year runup in prices.

Private nonresidential construction fell 0.1pc to a $513bn rate in August from the revised rate of $514bn in July.
Total spending on manufacturing ticked down to $97bn, a 0.6pc decrease from July's revised rate of $98bn but still 21.5pc above August 2021.

Private spending on power came in at a rate of $98bn in August, a 0.9pc drop from July's revised rate of $99bn and a steeper 14.2pc drop compared to August 2021. Office construction was at a rate of $74bn just 0.3pc higher than July but 1.2pc behind August 2021's rate. Education facilities were also roughly on par for spending, at a rate of $18.5bn in August being just 0.3pc below July's revised rate of $18.6bn.

Public construction spending was at a rate of $355bn for August, a 0.8pc drop from the July revised rate of $358bn but still 3.3pc higher than August 2021. Highway and street spending fell 1.4pc to a rate of $102bn in August, down from July's revised rate of $103bn but 1.7pc above the year prior.

Water supply spending hit a $23.7bn pace for August, 1.1pc down from July's rate but 23pc up from August 2021. Spending for sewage and waste disposal grew 1.5pc on the month to a rate of $32bn in August, also up 11.5pc compared to a year ago.

Transportation spending fell 0.4pc on the month to $41bn in August but was 0.9pc higher than August 2021. Public spending on power was little changed with just a 0.1pc fall from July to a $10bn rate in August, a level still 7.4pc higher than August 2021. Spending for educational facilities fell 0.4pc on the month to a rate of $78bn in August, a 3pc fall compared to last year.

By Aaron May and Robert Willis