US construction spending inches up in May, but homebuilding weak
Construction spending rose 0.1% after a downwardly revised 0.3% increase in April
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[WASHINGTON] US construction spending edged up in May as higher mortgage rates because of the Middle East conflict constrained homebuilding.
The Commerce Department’s Census Bureau said on Wednesday (Jul 1) that construction spending rose 0.1 per cent after a downwardly revised 0.3 per cent increase in April. Economists polled by Reuters had forecast construction spending gaining 0.1 per cent after a previously reported 0.4 per cent increase in April.
Construction spending fell 1.5 per cent on a year-over-year basis in May. Spending on private construction projects was unchanged after rising 0.3 per cent in the prior month. Investment in residential construction increased 0.3 per cent, reflecting renovations.
Spending on new single-family housing projects dropped 0.1 per cent. It tumbled 4.0 per cent year-on-year in May.
The US-Israeli war with Iran boosted oil prices, driving up inflation and mortgage rates. The average rate on the popular 30-year fixed-rate mortgage has increased by about 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed.
It averaged 6.49 per cent last week. Spending on multi-family housing units, which account for a small share of the housing market, dipped 0.1 per cent in May.
Investment in private non residential structures such as power plants and factories declined 0.3 per cent in May. Spending on factory construction dropped 1.3 per cent, while outlays on power plants eased 0.1 per cent, despite a surge in the construction of data centres to support artificial intelligence.
Investment in public construction projects increased 0.5 per cent after a similar gain in April. State and local government construction spending rose 0.4 per cent in May while outlays on federal government projects jumped 1.3 per cent, likely boosted by the building of detention centres as part of an immigration crackdown. REUTERS
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