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According to the Commerce Department, construction spending fell unexpectedly by 0.4 percent in July. This was the largest drop recorded since January. The June report showed a 0.3 percent drop. The July analysis was expected to show no greater reduction in construction activity. During the first seven months of 2007, construction spending was 3.4 percent below the same period last year.
While the drop may seem minor as a percentage, the seasonally adjusted annual rate of construction of $1.17 trillion indicates a significant softening of the residential market that was not countered by increases in other construction segments. Private residential construction took its 17th straight drop to reach an annual rate of $534 billion, the lowest since February 2004. Private construction overall declined 0.7 percent to an annual rate of $880 billion, the lowest level since May, 2005.
Both private nonresidential construction and public construction increased to record levels but their gains were not sufficient to offset other losses. Construction of public projects reached its highest level on record by climbing 0.7 percent to $289 billion. Educational construction rose by 1.9 percent and contributed significantly to the public project increase. Private nonresidential construction also set a record high by rising 0.4 percent to a $346 billion annual rate.
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