[ForexNews]

Construction spending came in above expectations, up 0.3% M/M in June led by gains in private residential (0.5%) and public (0.4%) projects. Single-family homebuilding posted its first increase since last September on the recent stabilization in housing starts. This is an area that should begin to provide growth within the economy; the results suggest that forecast for a 9.5% Q/Q annualized gain in residential investment in 3Q is on track. This would be the first quarterly gain in 3-1/2 years after what has been a massive 80% contraction in spending.

Another area of strength in June was federal outlays, up 1.9% M/M, boosted by strong gains in health care and public safety facilities. On the flip side, private multi-family residential spending fell 7.2% M/M on the heels of recent weakness in the corresponding housing starts figures. Non-residential spending also fell in June, down 0.5% M/M, as some strength in power facilities from prior months began to unwind. Commercial spending continued to contract to stand 30% lower than year-ago levels. This segment of construction will likely continue to be a drag on overall growth going forward given rising vacancy rates, tighter credit standards and falling demand.

Credit conditions improving
The National Association of Credit Managers (NACM) released their credit managers index, basically an ISM for credit conditions, and it rose to 48.0 in July from 46.4 in June in what was the sixth consecutive monthly increase. The breakeven point on this metric is 50, and we last saw that in August 2008. Still,
the one positive sign we uncovered was the index measuring new credit applications, which is viewed as a proxy for credit demand – it rose to 52.6 in July from 50.7 in June, the second consecutive month of expansion.