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Surprise fall in US construction spending in Oct
US construction spending unexpectedly fell in October as investment in private projects tumbled to its lowest level in three years, offering a cautionary note on the economy despite a recent string of upbeat reports.
The US Commerce Department said on Monday that construction spending dropped 0.8 per cent. Data for September was revised to show construction outlays declining 0.3 per cent, instead of rising 0.5 per cent as previously reported.
Economists polled by Reuters had forecast construction spending gaining 0.4 per cent in October. Construction spending increased 1.1 per cent on a year-on-year basis in October.
The report came on the heels of recent upbeat October data on the goods trade deficit, housing and manufacturing that led economists to boost their gross domestic product estimates for the fourth quarter.
In October, spending on private construction projects dropped one per cent to US$956.3 billion, the lowest level since October 2016, after declining 1.1 per cent in September. It was held down by a 0.9 per cent decrease in spending on private residential projects.
Outlays on residential construction dropped 1.1 per cent in September.
The second straight monthly drop in residential construction is despite lower mortgage rates.
Mortgage rates have declined as the US Federal Reserve has cut interest rates three times this year, softening the hit on the economy from a 16-month trade war between the US and China, as well as slowing global growth.
Spending on private non-residential structures, which includes manufacturing and power plants, plunged 1.2 per cent in October to the lowest level since January 2018.
Investment in private non-residential structures fell one per cent in September. Outlays on private nonresidential structures have been depressed by a manufacturing downturn due to trade tensions and cheaper energy products.
Investment in non-residential construction fell at its steepest pace in nearly four years in the third quarter. That contributed to business investment contracting for a second straight quarter.
Spending on public construction projects slipped 0.2 per cent after jumping 1.9 per cent in September. Spending on state and local government construction projects fell 0.3 per cent. It surged 2 per cent in September.
Outlays on federal government construction projects increased 0.6 per cent in October to the highest level since May 2013. That followed a 0.7 per cent rise in September. REUTERS