Construction spending contracted another 0.4 percent in June, a weaker showing than the consensus estimate of a 0.1 percent increase in an Econoday survey. The previous month was revised down, leading to a monthly decrease of 0.4 percent, compared to the 0.3 percent decline initially reported.

Total residential spending was down 0.7 percent in June, while total nonresidential edged down just 0.1 percent.

Total private construction spending contracted 0.5 percent, while public construction spending was up 0.1 percent.

Private residential dropped 0.7 percent, entirely due to a 1.8 percent drop in new single-family construction, while multi-unit projects were flat.

Private nonresidential spending was down a more moderate 0.3 percent on the month. Office decreased 1.4 percent, educational 1.0 percent and manufacturing 0.4 percent. On the upside, transportation was up 2.2 percent, power 0.1 percent, lodging up 0.5 percent, and communication up 0.6 percent.

Nonfarm payrolls showed that the construction sector added 3,000 jobs in June and 2,000 jobs in July.

Spending is expected to recover by only 0.1 percent in June after declining 0.3 percent in May.

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.