Construction spending in the U.S. has now declined for the second consecutive month, according to the U.S. Census Bureau of the Department of Commerce, and with that news, Jefferies analysts are concerned certain chemicals companies exposed to the sector could be negatively affected. 

Jefferies points to GCP Applied Technologies (GCP) - Get Report, PPG Industries (PPG) - Get Reportand Omnova Solutions (OMN) - Get Report, as the three companies in the chemicals space most heavily exposed to construction spending. 

The firm said in a Tuesday note that GCP, PPG and Omnova are 75%, 40% and 35% exposed to construction, respectively. 

While the Architecture Billings Index, or ABI index, remains solid, according to Jefferies' Laurence Alexander, the decline in U.S. construction spending both month-over-month in May and year-over-year "suggests further softness in the data could motive a rotation in [the third quarter]" away from construction exposed entities and possibly toward industrial- and durable goods-exposed companies. The ABI iidex is a a diffusion index that serves as an economic indicator that leads nonresidential construction activity by approximately 11 months.

The Department of Commerce said July 1 that construction spending during May 2016 was estimated at a seasonally adjusted annual rate of $1,143.3 billion, 0.8%  below the revised April estimate of $1,152.4 billion.

May's data marks the second straight monthly decline after a 2.0% decline in April, which was revised down from -1.8%, according to Jefferies.

"We believe another month or two of soft data could trigger a rotation debate between cyclical end-markets," Alexander wrote.

This might not be such a great sign for GCP, PPG and Omnova, which all derive more than 30% of their sales from construction end-markets and have benefited from a strong residential and nonresidential construction market over the past year.

And chemicals players like Axalta (AXTA) - Get Report, W.R. Grace(GRA) - Get Report andQuaker Chemical(KWR) - Get Reportmight stave off any serious blow with no direct construction exposure but could be adversely impacted by any ripple effects a continued spending slowdown would have on other end-markets, such as steel production, Jefferies noted. 

If a rotation to durable goods- and industrial-exposed names play out, Jefferies points to 3M (MMM) - Get Report, Albemarle (ALB) - Get Report and Univar (UNVR) - Get Report as relative beneficiaries of such a turn "if investors still want to preserve overall cyclical exposure."

The firm notes that U.S. industrial production, residential construction and non-residential construction have all decelerated recently, though non-residential had been a bright spot until now.

"From current levels, the normal seasonal cadence for non-residential construction would imply the third quarter closing out down 0.6% year-over-year, the fourth quarter ending up 1.8%, and the first quarter of 2017 finishing down 0.7%," the analysts explained. 

The typical lags between residential and non-residential construction, which the firm claims to be about 2 years, supports Jefferies' thesis that non-residential construction ramps back up in the second half of 2017, while residential potentially decelerates, though the firm notes the decline most likely will not be enough to put pressure on employment in the sector. Furthermore, Jefferies believes the impact such a turn could have on housing prices would be "relatively benign."