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US construction spending down unexpectedly in March

Washington

US construction spending unexpectedly fell in March after three straight monthly gains, pulled down by declines in both private and public construction projects.

The Commerce Department said on Wednesday that construction spending decreased 0.9 per cent. Data for February was revised to show construction outlays rising 0.7 instead of increasing 1 per cent as previously reported.

Construction spending data for January was also revised lower to account for additional projects identified as eligible for inclusion in the series.

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Economists polled by Reuters had forecast construction spending edging up 0.1 per cent in March. Construction spending dropped 0.8 per cent on a year-on-year basis in March.

March's weak construction spending as well as downward revisions to January and February outlays suggest the government's initial estimate of first-quarter gross domestic product published last week could be revised lower.

Increased state and local government spending on roads and highways helped to lift GDP growth to a 3.2 per cent annualised rate in the first quarter, according to the advance estimates.

In March, investment in public construction projects fell 1.3 per cent after rising 3.2 per cent in the prior month.

Spending on state and local government construction projects dropped 1.1 per cent after advancing 3.4 per cent in February.

Outlays on federal government construction projects tumbled 2.7 per cent after increasing 1.4 per cent in February.

Spending on private construction projects dropped 0.7 per cent in March to the lowest level since August 2017, after slipping 0.2 per cent in the prior month. Private construction outlays have now declined for three straight months.

Investment in private residential projects plunged 1.8 per cent to the lowest level since December 2016, after falling 0.4 per cent in February. The housing market has struggled, with spending on homebuilding contracting for five straight quarters.

With mortgage rates declining from last year's lofty levels, the outlook for the housing market is improving, though land and labour shortages remain a challenge. REUTERS