U.S. Markets

U.S. construction spending falls as government outlays tumble

FILE PHOTO: A construction labourer works on top of a building in Los Angeles, California, U.S., March 6, 2017. REUTERS/Mike Blake/File Photo

WASHINGTON (Reuters) - U.S. construction spending unexpectedly fell in June as investment in public projects recorded its biggest drop since March 2002, suggesting a downward revision to the second-quarter economic growth estimate.

The Commerce Department said on Tuesday that construction spending tumbled 1.3 percent to $1.21 trillion, the lowest level since September 2016. Spending in May was revised to show it rising 0.3 percent.

Economists polled by Reuters had forecast construction spending increasing 0.4 percent in June after it was previously reported as being unchanged in May. Construction spending increased 1.6 percent on a year-on-year basis.

The government said on Friday in its advance gross domestic product estimate that the economy grew at a 2.6 percent annualized rate in the second quarter.

In June, investment in public construction projects plunged 5.4 percent, the biggest drop since March 2002. The decline pushed public construction spending to its lowest level since February 2014.

Outlays on state and local government construction projects fell 5.1 percent in June, also the largest fall since March 2002. Federal government construction spending slumped 9.3 percent, the largest drop since December 2010.

Spending on private construction projects slipped 0.1 percent after a similar drop in May. Investment in private residential construction fell 0.2 percent.

Spending on private nonresidential structures edged up 0.1 percent in June after surging 0.6 percent in May. Investment in residential and nonresidential structures such as oil and gas wells is slowing as the boost from oil prices fades.

Reporting by Lucia Mutikani; Editing by Paul Simao