June Construction Spending Falls on Home Building
The July ISM index showed US manufacturing sector activity progressed further, as suggested by the Markit estimate and most of the regional data.
Survey respondents in the ISM report noted that while some issues remain, there was considerable improvement in July after the index finally regained its footing in June.
There were some concerns cited about the uncertainty surrounding the reopening of schools and the continued closure of both suppliers and customers. However, ISM said that positive comments outnumbered negative comments by a 2-1 margin.
The headline PMI index rose to 54.2 from 52.6 in June, above expectations for an increase to 53.5 and the highest index reading since March 2019.
The new orders index rose to 61.5 from 56.4 in June, while the production reading rose to 62.1 from 57.3, both showing significant expansion in line with comments from respondents that activity improved significantly.
The employment index also improved, rising to 44.3 from 42.1 in June, but still indicated contraction as uncertainty remains.
Inventories declined in the month due to increased demand and the desire to keep inventories tight. At the same time, supplier deliveries slowed further, reflecting the solid gain in new orders.
The Markit manufacturing index released earlier Monday was revised down to 50.9 from the 51.3 flash estimate, but remained above the breakeven point. The index was 49.8 in June.
Construction spending for June, released at the same time as the ISM report, fell by 0.7%, well below the 1.3% increase expected. Year-to-date construction spending was still 5.0% above the same period a year earlier.
Private residential construction fell by 1.5%. Calculations using the published data show that private new home construction fell by 2.1%, in contrast to the housing starts and permits data for June that showed significant gains when they were released on July 17.
Single-family building fell by 1.5%, offset by a 3.0% gain in multi-family building. Home remodeling was down 0.4%.
Private nonresidential construction spending rose by 0.2%, lifted by gains in power and manufacturing that were offset by a sharp decline in commercial building. Private construction in the amusement and recreation category declined by 6.2% in the month as uncertainty remains about the future path of social distancing and its impact on this industry.