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Construction spending falls to 9-month low, ISM manufacturing index continued to expand

Key Points
  • National factory activity continued to rise in August.
  • Construction spending fell below expectations of economists polled by Reuters.
A worker stands on the roof of a home under construction at a new housing development in San Rafael, California.
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U.S. construction spending unexpectedly fell in July, hitting a nine-month low amid a steep decline in investment in private structures.

The Commerce Department said on Friday that construction spending decreased 0.6 percent to $1.21 trillion also as investment on public sector projects fell.

That was the lowest level since October 2016 and followed a downwardly revised 1.4 percent tumble in June.

Economists polled by Reuters had forecast construction spending increasing 0.5 percent in July after a previously reported 1.3 percent drop in June. Construction spending increased 1.8 percent on a year-on-year basis.

In July, spending on private nonresidential structures plunged 1.9 percent to the lowest level since April 2016.

The percent drop was biggest since October 2015 and followed a 1.6 percent fall in June. Investment in residential and nonresidential structures such as oil and gas wells is slowing
as the boost from recovering oil prices fades.

As a result, spending on private construction projects fell 0.4 percent in July after slipping 0.5 percent in June. Investment in private residential construction rose 0.8 percent.

Outlays on public construction projects dropped 1.4 percent to their lowest level since February 2014. That followed a 4.4 percent plunge in June. Spending on state and local government
construction projects fell 1.4 percent in July, also dropping to the lowest level since February 2014.

Federal government construction spending declined 1.2 percent to the lowest level since April 2016.

Construction spending was expected to reverse June's losses to gain 0.6 percent in July. The indicator missed forecasts in the previous month when it declined 1.3 percent.

ISM manufacturing index expands in August

National factory activity gained for the third consecutive month in August, beating expectations and continuing expansion not seen since August 2014.

The U.S. manufacturing index registered 58.8 in August, up from 56.3 in July, beating estimates of 56.5, as polled by Reuters. A reading above 50 on the Institute for Supply Management's (ISM) index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.

— contributed to this report.

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