U.S. Construction Spending Nudges Up: 3 Fund Picks

The U.S. Commerce Department reported on Jul 2 that domestic construction spending had ticked up in May, buoyed by an increase in outlays on private as well as public construction projects.

Although, the metric came in below market expectations, it showed a steep rise on a year-over-year basis. Such an increase points at strength in the construction market despite trade war-related woes. Under such broadly encouraging conditions, investing in mutual funds with significant exposure to construction companies makes it prudent.

U.S. Construction Activity Gains Traction

Construction spending in the United States ticked up 0.4% in May. The figure came in lower than the consensus estimate of an increase of 0.5%. However, spending on construction projects across the United States increased 4.5% in May to an all-time high of $1.31 trillion.

However, data for April was revised down to 0.9% instead of 1.8% reported earlier. Experts speculated that a downward revision in April data could lead to economists reducing their second-quarter GDP growth forecast even further. However, the Atlanta Federal Reserve stated on Jul 2 that it expects the U.S. economy to grow at an annualized pace of 3.8% in the second quarter compared with 2% in the first.

Factors Supporting Growth

The uptick in May was supported by a steady increase in outlays on private as well as public construction projects. The total investment in private construction rose 0.3% in May. Further, investments in residential projects alone rose 0.87% in May. Also, spending on new single-family homes shot up 0.6% and that on apartment construction rose 1.6%. However, spending on private non-residential projects declined 0.3% in May.

On the other hand, investment in public construction rose 0.7% in May to $304.1 billion — its highest level since October 2010. What contributed to such an increase was a 0.6% rise in state and local construction projects to $282.1 billion. This marked its biggest increase since 2009.

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