WASHINGTON, (Reuters) - U.S. construction spending barely rose in August as the largest increase in private residential investment in nine months was offset by a second straight monthly decline in outlays on nonresidential projects.
The Commerce Department said on Tuesday construction spending edged up 0.1%. Data for July was revised down to show construction outlays unchanged instead of nudging up 0.1% as previously reported.
Economists polled by Reuters had forecast construction spending increasing 0.4% in August. Construction spending fell 1.9% on a year-on-year basis in August.
Spending on private residential projects jumped 0.9%, the biggest gain since November 2018, after rising 0.6% in July. Housing starts and building permits surged to a more than 12-year high in August, government data showed last month, lifted by declining mortgage rates.
The 30-year fixed mortgage rate has dropped about 130 basis points from last year’s highs to an average of 3.64%, according to data from mortgage finance agency Freddie Mac.
Mortgage rates have declined as the Federal Reserve has cut interest rates, twice so far this year, to keep the longest economic expansion in history on track. The expansion, now in its 11th year, is under threat from a trade war between the United States and China, and slowing growth.
Spending on private nonresidential structures, which includes manufacturing and power plants, dropped 1.0% in August to the lowest level since January 2018. Investment in private nonresidential structures decreased 1.6% in July.
Outlays on private nonresidential structures have been weighed down by a manufacturing downturn due to trade tensions and cheaper energy products. Investment in nonresidential construction fell at its steepest pace in more than three years in the second quarter. That contributed to business investment declining for the first time in more than three years.
Spending on private construction projects was unchanged in August after declining for four straight months.
Investment in public construction projects rose 0.4% after increasing 1.4% in July. Spending on state and local government construction projects gained 0.6%. That followed a 1.7% surge in July. Outlays on federal government construction projects dropped 2.2% in August after falling 2.5% in the prior month.
Reporting By Lucia Mutikani; Editing by Andrea Ricci