U.S. Markets

U.S. construction spending posts biggest drop in seven months

FILE PHOTO: A construction worker walks past a mural of the South Bend skyline in South Bend, Indiana, U.S., July 1, 2019. Picture taken July 1, 2019. REUTERS/Joshua Lott

WASHINGTON, (Reuters) - U.S. construction spending fell by the most in seven month in June as investment in private construction projects tumbled to a more than 1-1/2-year low.

The Commerce Department said on Thursday construction spending dropped 1.3%, the biggest decline since last November. Data for May was revised up to show construction outlays falling 0.5% instead of decreasing 0.8% as previously reported.

Economists polled by Reuters had forecast construction spending rising 0.3% in June. Construction spending fell 2.1% on a year-on-year basis in June.

Spending on private construction projects dropped 0.4% in June to $962.9 billion, the lowest level since October 2017. That followed a 0.3% decline in the prior month. Investment in private residential projects fell 0.5% in June after being unchanged in May.

Homebuilding has remained weak even as mortgage rates have dropped sharply from last year’s high levels. Spending on residential construction has contracted for six straight quarters, the longest such stretch since the Great Recession.

Spending on private nonresidential structures, which includes manufacturing and power plants, fell 0.3% in June after decreasing 0.6% in the prior month. Private nonresidential investment has now declined for three straight months.

Investment in nonresidential construction fell at its steepest pace in more than three years in the second quarter, helping to hold back economic growth to a 2.1% annualized rate. The economy grew at a 3.1% pace in the first quarter.

In June, investment in public construction projects tumbled 3.7%, the largest drop since March 2002, after decreasing 1.2% in May. Spending on state and local government construction projects fell 4.1%, also the biggest decline since March 2002. That followed a 0.9% decrease in May.

Outlays on federal government construction projects rebounded 2.6% in June after plunging 5.6% in the prior month.

Reporting By Lucia Mutikani; Editing by Andrea Ricci