Economy Watch: Construction Spending Edges Downward

U.S. construction spending dropped 0.5 percent in February compared with January, according to the Census Bureau on Friday. The monthly decline was full due to a drop in nonresidential construction spending, which was off 1.4 percent, while residential construction gained 0.9 percent. Most categories of nonresidential construction spending were down for the month, but not all.

In fact, there was some strength in office construction for the month, which was up 3.8 percent, the most of any nonresidential category. Other nonresidential gainers for the month were lodging, health care and transportation. By contrast, construction spending on manufacturing facilities dropped 5.9 percent for the month, responding to lower international demand for U.S. goods, as other economies slow down and the dollar remains strong.

Compared with last year, however, U.S. construction spending in February was considerable stronger: up 10.3 percent altogether. Both residential and nonresidential spending were up annually by similar amounts: 10.5 percent for residential, 10.1 percent for nonresidential.

Almost all categories of nonresidential construction spending were up year-over-year. Office and lodging were particularly strong, with spending from them gaining 30.1 percent and 25.3 percent since February 2015, respectively. Industrial, healthcare, and other categories were also up, though not as much. Even spending on manufacturing facilities eked out a gain of 0.8 percent since last year.