At his press conference last week Jerome Powell noted that housing is showing signs of a rebound, an assessment confirmed by a sharp rise in residential spending that lifted total construction spending by 0.5 percent in June, just a tick below Econoday's consensus.

Residential spending jumped 0.9 percent in the month despite a very tough comparison with May's 2.9 percent surge. These are the two strongest showings since early last year before the Federal Reserve started raising interest rates.

Nonresidential spending, however, is suddenly sagging, up only 0.1 percent in June despite a very easy comparison against a 0.2 percent fall in May. Nonresidential construction spending, where lead times are especially long, didn't show the same kind of impact from higher interest costs, rising strongly throughout 2022 and early 2023 and especially so for manufacturing as well as conservation & development and also lodging and health care.

Residential spending still has a long way to go to catch up reflected in the year-over-year rates, at minus 10.3 percent for residential versus plus 18.1 percent for nonresidential spending. But with homeowners keeping their homes off the market, homebuyers are being increasingly pushed into the new home market which points to further gains for residential construction.

Recent US data including this report have been coming in very near Econoday's consensus forecasts reflected in Econoday's Consensus Divergence Index which is close to the zeroline at minus 6, a reading that falls within the consensus range.

Construction spending for June is expected to rise a further 0.6 percent following May's 0.9 percent increase that benefited from a sharp jump in residential spending.

The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.

Construction spending has a direct bearing on stocks, bonds and commodities because it is a part of the economy that is affected by interest rates, business cash flow and even federal fiscal policy. In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends.

Businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home.

A portion of construction spending is related to government projects such as education buildings as well a highways and streets. While investors are more concerned with private construction spending, the government projects put money in the hands of laborers who then have more money to spend on goods and services.

On a technical note, construction outlays for private residential, private nonresidential, and government are key inputs into three components of GDP--residential investment, nonresidential structures investment, and the structures portion of government expenditures.

That is why construction spending is a good indicator of the economy's momentum.