Construction spending unexpectedly falls in September

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A home under construction stands behind a "sold" sign in a new development in York County, South Carolina, U.S., February 29, 2020. REUTERS/Lucas Jackson

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WASHINGTON, Nov 1 (Reuters) - U.S. construction spending unexpectedly fell in September amid declines in outlays on both private and public projects.

The Commerce Department said on Monday that construction spending dropped 0.5% after edging up 0.1% in August. Economists polled by Reuters had forecast construction spending gaining 0.4%.

Construction spending increased 7.8% on a year-on-year basis in September. The government reported last week that gross domestic product increased at a 2.0% annualized rate, stepping down from the April-June's robust 6.7% pace.

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Spending on private construction projects decreased 0.5% in September after falling 0.3% in August. Outlays on residential construction dropped 0.4% after nudging up 0.1% in August. Single-family homebuilding spending declined 0.6% and outlays on multi-family housing projects slipped 0.3%.

Shortages and more expensive building materials are holding back homebuilding. Residential investment contracted for a second straight quarter in the third quarter, weighed down by declines in home improvements and single-family homebuilding.

Investment in private non-residential construction like gas and oil well drilling fell 0.6% in September. Spending on structures declined for a second straight quarter in the July-September period, led by commercial and healthcare structures.

Spending on public construction projects tumbled 0.7% in September after increasing 1.2% in August. Outlays on state and local government construction projects fell 0.4%, xxx federal government spending plunged 4.3%.

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Reporting by Lucia Mutikani

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