US Q2 GDP tracking 2.7% after June construction spending

US construction spending rose a modest 0.1% m/m in June, well below (0.9%) and consensus (0.6%) expectations, as prior months' data were revised significantly higher. April construction spending was revised up to 3.8% m/m from the prior estimate of 2.1%, and May data were revised up to 1.8% m/m from the prior estimate of 0.8%. While these revisions made for negative base effects in June, they indicate much stronger momentum for both private and public construction spending in early Q2 than was previously estimated.

"In June, private residential construction spending rose 0.4% m/m, boosted by solid multifamily activity 2.8% m/m, previous-1.3% and improvements 0.7% m/m, previous: 1.4%. These gains were buffeted by a 0.3% m/m decline in the single-family sector, which was anticipated from monthly housing starts data. Private nonresidential construction spending fell 1.3% m/m in June, although revised data show a robust pace of expansion from March through April. Private nonresidential construction is now estimated to have expanded 4.9% m/m in April and 2.5% in May, a 1.3% m/m decline in June, is less concerning coming off such a strong spring construction season for the nonresidential sector. Public sector spending rose 1.6% m/m in June, with state and local spending up 2.2% m/m and federal down 4.7%", says Barclays.

Relative to the BEA's assumptions incorporated in the advance estimate of Q2 GDP, this morning's data for June imply stronger quarterly profiles for private residential, private nonresidential, and state & local government investment. After incorporating these revised source data, Q2 GDP tracking estimate rose four-tenths, to 2.7%, notes Barclays.