U.S. construction spending rises in September, but August revised lower

FILE PHOTO: Single family homes being built by KB Homes are shown under construction in San Diego, California, U.S., April 17, 2017. REUTERS/Mike Blake

WASHINGTON (Reuters) - U.S. construction spending unexpectedly rose in September as a surge in public construction outlays offset the third straight monthly decline in investment in private projects.

The Commerce Department said on Wednesday that construction spending increased 0.3 percent to $1.22 trillion. But August’s construction outlays were revised down to show a 0.1 percent gain instead of the previously reported 0.5 percent rise.

Economists polled by Reuters had forecast construction spending unchanged in September. Construction spending increased 2.0 percent on a year-on-year basis.

In September, investment on private construction projects fell 0.4 percent after slipping 0.1 percent in August. It was the third straight monthly drop in private construction outlays and reflected a 0.8 percent decline in spending on private nonresidential projects. Spending on nonresidential projects in September was the lowest since April 2016.

Spending on nonresidential structures has now declined for four consecutive months. Spending on oil drilling has been slowing in recent months amid moderate gains in oil prices and ample crude supplies. Spending on residential structures was unchanged in September.

The data could impact the government’s gross domestic product estimate for the third quarter published last week. The government’s advance estimate put economic growth at a 3.0 percent annualized rate in the July-September quarter, with both residential and nonresident structures subtracting from output.

In September, outlays on public construction projects jumped 2.6 percent after rising 0.7 percent in August. Spending on state and local government construction projects climbed 2.5 percent. Federal government construction spending soared 3.4 percent.

Reporting by Lucia Mutikani; Editing by Andrea Ricci