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    US construction spending falls by 0.1%, meeting expectations after a 0.4% decline

    by VT Markets
    /
    Sep 2, 2025
    US construction spending in July 2025 dropped by 0.1%, which matches what analysts expected. This follows a previous decline of 0.4%.

    Sector Cooling Confirmed

    The July 2025 construction spending data confirms our prediction of a slight slowdown in the sector. Since the market was expecting this, we are now focusing on what it means for the overall economy. We view this as more evidence that the economy is slowing down. Ongoing weakness in the construction area, along with the August 2025 inflation report showing core CPI around 3.3%, puts the Federal Reserve in a tough spot. The upcoming FOMC meeting this month is crucial for deciding interest rate expectations. We think the Fed will rely on data, creating an uncertainty that can be advantageous for traders. Due to this uncertainty, we are looking at protective strategies for broad market indices. Buying put options on the S&P 500 or Nasdaq 100 can help guard against a possible economic downturn. The VIX, which measures market volatility, has been low, around 14, through late August 2025, making these options relatively cheap.

    Market Reaction to Economic Slowdown

    We’re paying close attention to the housing market, which is affected by these trends. Recently, 30-year mortgage rates remained above 7% through August 2025, and the National Association of Realtors reported a decline in existing home sales for July. This suggests ongoing pressure on homebuilder stocks, making bearish positions on ETFs like XHB an appealing option. The slowdown also suggests a decrease in demand for industrial materials. We expect prices for materials like copper and lumber could struggle in the upcoming weeks. We are considering short positions in copper futures, especially since its price has had trouble staying above $4.50 per pound recently. Create your live VT Markets account and start trading now.

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