Construction Spending: Continued Declines

Bottom Line:   Construction spending fell again in July, led by declines in residential projects after a historic move higher in mortgage rates. Nonresidential construction finally started to recover this year and was accelerating modestly by July but remained well below trend levels after two years of declines. Residential remained a big concern, dropping over 4.5% annualized in the three months ended in July. Overall, construction shifted from a tailwind to a headwind for economic growth, with the slight recovery in nonresidential spending nowhere near enough to offset the declines in residential.