EM LATAM CREDIT: Panama: Support for Copper Mine Reopening Increased – Positive

Construction spending contracted in August for a 10th month in the last 11, despite residential activity seeing a rare uptick. Overall construction spending came in at -0.1% M/M (in line with consensus, -0.4% prior) in nominal, seasonally-adjusted annual rate terms.

• Private sector activity contracted for the 14th consecutive month (-0.2% after -0.5%). While residential construction - a little more than half of overall private sector construction - ticked 0.1% M/M higher for the first sequential increase of the year (-0.6% prior), nonresidential construction has seen continued deterioration. It contracted 0.5% (after -0.4%) for the worst performance since March, and comes as manufacturing construction fell 0.7% (same as prior).
• Public sector construction, about 1/4 of overall construction, grew for a 5th consecutive month, at 0.3%.
• The overall picture is of a  2.5% 3M/3M annualized rate of contraction for overall construction, a less-weak pace of growth than seen earlier in the year (closer to -5% in March) but with residential leading the "recovery" (-5.4% 3M/3M ann, best since February), and non-residential looking increasingly weak (-3.7%, weakest since February, led by Manufacturing construction at -7.7%).
• After tripling between mid-2021 and mid-2024 (rising proportionally from under 5% of construction to over 10%), the level of manufacturing construction has tailed off and is now at a 21-month low, with overall private sector construction at a 25-month low (and down 5+% from peak).
• Overall, since peaking in December 2023, private nonresidential construction has fallen by 6.9%. About 2/3 of the decline is attributable to a fall in commercial construction, in turn almost all warehousing/general commercial spending; within manufacturing the biggest pullback has been in computer/electronic/electrical which is down 10%.
• In another sign that AI-related spending is helping prop up the economy as a whole: data center spending hit a fresh all-time peak in July, and is up 69% since end-2023 (when overall construction started to decline). The rate of growth has started to slow in recent months but this is still clearly the brightest spot in an otherwise weak construction picture.

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