There is some improvement compared to April though

Construction Spending Keeps Declining in the US

Posted Wednesday, July 1, 2020 by
Skerdian Meta • 2 min read

Today we had some positive reports being released form the US, first the ADP non-farm employment which showed a 2.37 million increase in employed people during June, while the report for May was revised higher from -2.76 million to more than 3 million. But, the construction spending kept declining, although that report is still for May.

US Construction Spending for May 2020

  • US construction spending for May 2020 fell by -2.1% vs. 1.0% estimate.
  • Prior month was revised lower to -3.5% from -2.9%
  • residential construction fell -3.9% vs. -5.0% last month
  • nonresidential fell -0.9% vs. -2.5% last month
  • private construction spending fell -3.3% vs. -3.8% last month with residential falling by -4.0% from -5.1% and nonresidential falling by -2.4% vs. -2.3%
  • public construction spending rose by 1.2% vs. -2.7% last month. Residential public spending increased 3.6% vs. -2.7%. Nonresidential public spending increase 1.2% vs. -2.7% last month
Although lower than expected the number is for May when uncertainty was still fairly high.  Nevertheless the revision to the prior month nearly reached the 2011 a low of -3.7% (see chart below).

SF Fed’s Mary Daly is a nonvoting member on the Federal Reserve Board.  She is speaking in a virtual economic forum

Fed’s Daly – speaking in a virtual economic forum – is saying:
  • she would be hesitant to call recent positive signs a recovery
  • she sees no V-shaped recovery
  • sees US unemployment staying above 10% through at the end of the year under her best case scenario
  • if we can get virus under control, the recovery can take just 4 or 5 years
  • virus path to dictate pace at which unemployment declines
  • sees unemployment staying elevated even as workers returning
  • we are in a really uncertain place right now
  • consumer demand remains much weaker than pre-pandemic

Comments are less positive than the market is expecting. A 4-5 year recovery is certainly not what the market expects or wants (nor the Trump administration into the November election).


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