Soft US manufacturing and construction numbers emphasise the dependency on services

Construction spending fell 0.1%MoM rather than rising 0.2% as expected, although April's number was revised up quite a bit to +0.3%MoM growth. Both residential and non-residential construction spending fell in May. Issues with financing construction activity and weak demand due to high borrowing costs are likely to mean construction activity also softens through the year.

Furthermore, the chart below shows that investment tied to the CHIPS Act, which was designed to incentivise the re-shoring of semiconductor chip manufacturing, is the primary driver of construction spending in the US right now. The money is not infinite though, and we expect growth to subside through the second half of the year. Putting the manufacturing and construction numbers together emphasises how reliant the US is on the consumer to keep the service sector momentum going.