U.S. Construction Spending Gains Traction: 3 Fund Picks

The U.S. Commerce Department reported on Sep 4 that domestic construction spending picked up in the month of July. Such an increase was achieved on the back of a spike in homebuilding activity as well as construction of publicly funded schools and highways.

Although the metric came in below expectations, it showed a steep rise on a year-over-year basis. This points to the fact that construction activity in the United States remained largely unperturbed by increasing geopolitical tensions. Under such encouraging conditions, investing in mutual funds with significant exposure to construction companies seems judicious.

Construction Activity Nudges Up in July

Construction spending in the United States increased by 0.1% in July. The figure came in lower than the consensus estimate of an increase of 0.5%. However, the July figure increased 5.8% from the same period last year. In fact, through the first seven months of the year, spending was 5.2% higher than in the same period of 2017.

Further, spending on public construction projects gained 0.7% in July after declining 1.7% in the previous month. Notably, government spending on educational and highway constructions jumped 2.1% and 0.4%, respectively.

Factors Supporting Growth

July’s increase was also supported by an uptick in residential construction, which gained 0.6% from June following two straight months of declines. Further, the metric surged 6.6% from the same period in 2017, with new single-family and multi-family constructions gaining 6% and 1.1%, respectively.

Meanwhile, builders continue to witness robust demand for new homes, buoyed by a steady increase in the number of job additions as well as income growth. The new home sales figure was 12.8% higher in July than last year, reflecting strong demand for homes as the economy continues to create jobs.

3 Best Choices

We have, thus, selected three real estate mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

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