Economics Group of Wells Fargo Bank, N.A.
Residential Lifts Spending While Tighter Credit Weighs on Nonresidential Projects
Despite macroeconomic headwinds sapping construction in some sectors, overall construction spending is improving on-trend. Outlays increased 0.5% over the month, the sixth consecutive bump. June’s improvement translated to a 3.5% annual gain. Robust manufacturing investment continues to lift nonresidential spending as firms expand their capacity for semiconductor and electric vehicle production. Residential spending was another bright spot, fueled by widespread improvements in single-family and multifamily building. The recent turnaround has mostly been fueled by single-family construction, however, as new home sales trend higher and builders scale up production to fill existing inventory gaps. As of June, single-family starts have picked up for four of the last five months, foretelling additional near-term strength in single-family spending. Multifamily outlays also continued to rise in June as builders work through the robust supply pipeline. Rising vacancy rates are giving builders pause on starting new projects, however, especially as apartment demand softens from its breakneck pace following the pandemic recession. Elsewhere, it seems as if nonresidential outlays have started to flatline. For example, the shift to e-commerce continued to weigh on retail construction while higher interest rates appear to be slowing warehouse construction. READ FULL ARTICLE >>