U.S. construction spending beats expectations on homebuilding
WASHINGTON — U.S. construction spending increased more than expected in September as investment in homebuilding rose its highest level in nine months.
The Commerce Department said on Friday construction spending rebounded 0.5%. Data for August was revised down to show construction outlays falling 0.3% instead of ticking up 0.1% as previously reported.
Economists polled by Reuters had forecast construction spending gaining 0.2% in September. Construction spending dropped 2.0% on a year-on-year basis in September.
Spending on private residential projects increased 0.6% to $511.4 billion, the highest level since December 2018, after advancing 0.8% in August. Investment in residential construction rebounded in the third quarter after contracting for six straight quarters, thanks to declining mortgage rates.
Mortgage rates have declined as the Federal Reserve has cut interest rates three times 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 0.3% in September. Investment in private nonresidential structures tumbled 1.5% in August.
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 nearly four years in the third quarter. That contributed to business investment contracting for a second straight quarter.
Spending on private construction projects rose 0.2% in September after falling 0.3% in August.
Investment in public construction projects jumped 1.5% after declining 0.4% in August. Spending on state and local government construction projects raced ahead 1.6%.
That followed a 0.2% drop in August. Outlays on federal government construction projects dropped 1.1% in September, decreasing for a third straight month. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)