The dollar value of construction put in place fell 0.3 percent in July from June after an upward revision to unchanged in June from May. The July decline is below the consensus of up 0.1 percent in the Econoday survey of forecasters.

With few exceptions, the major categories of construction were lower in July on a month-over-month basis. Overall private construction was down 0.4 percent in July while public construction was up a scant 0.1 percent. However, compared to a year ago, construction spending was up a more substantial 6.7 percent.

Private residential construction fell 0.4 percent in July due to a decline of 1.9 percent in single-family buildings. Multi-unit projects were unchanged from the prior month, while home improvement - total private residential construction less single- and multi-unit projects - was up 1.2 percent in July. Private resident construction was up 7.7 percent compared to July 2023. Moving past the month-over-monthly fluctuations, spending on home construction remains strong and is likely to pick up in the coming months as borrowing costs decline with lower interest rates.

Private nonresidential construction fell 0.4 percent in July, but was up 4.5 percent year-over-year. Individual categories were mostly lower. An exception is the largest category of manufacturing which was flat in July and up a whopping 20.2 percent from a year ago. If the manufacturing sector has seen soft conditions in the past year or two, businesses are investing in upgrading and/or expanding facilities.

Public construction fell 2.6 percent for residential in July, but was up 0.2 percent for nonresidential projects. The largest categories of education and highway and street construction was down 0.9 percent and 0.8 percent, respectively. These were more than offset by broad-based gains in other categories.

Construction spending is expected to edge 0.1 percent higher on the month in July versus June's 0.3 percent decline. Year-over-year, spending was up 6.2 percent in June.

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.