Wells Fargo Reports: Construction Spending Softens in August

For the second consecutive month, total construction spending pulled back in August. The loss of spending momentum was broad based with lower readings in residential, nonresidential and public spending.

Broad-Based Weakness

• Following a downwardly revised 0.3 percent decline in July, construction spending fell 0.7 percent in August. Private sector outlays declined 0.3 percent, while public sector spending tumbled 2.0 percent.
• Private nonresidential construction, which has been on a roll recently, took a breather in August, led by declines in commercial, power and manufacturing.

Sector Outlook Still Constructive

• While the August report proved soft, construction spending continues to reflect a sector with positive momentum. Through the first eight months of the year, construction spending is up 4.9 percent from the same period in 2015. Anticipation for the continuation of the U.S. economic expansion and a low interest rate environment supports our outlook for moderate construction spending gains in the quarters ahead.