With little fanfare, the U.S. construction sector is heating up, turning it into a growth engine for the economy.
“Private construction is on a roll,” said Patrick Newport, U.S. economist for IHS Global Insight.
Construction played a pivotal role in the second quarter, adding 1.3 percentage points to the solid 3.7% annual gross domestic product.
The momentum in the sector is still going strong into the third quarter, dispelling fears of a pull back, according to government data released Tuesday.
“The overall impression from the past few months is that the construction sector overall is the strongest part of the economy, with spending up at a remarkable 26% annualized rate in the three months to July,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Outlays for U.S. construction projects rose 0.7% in July, to a seasonally adjusted annual rate of $1.08 trillion, the highest level since May 2008, the Commerce Department reported Tuesday.
Construction is up 13.7% over the past year. What’s behind the surge? Private sector non-residential building, which is up 1.5% in the month and has jumped 18.2% over the past year.
For the first seven months of the year, construction is up 10.8% from last year. Both single-family and multifamily residential are double-digits ahead of last year’s pace, Newport said.
