U.S. construction spending rebounds less than expected in March

WASHINGTON (Reuters) – U.S. construction spending rebounded far less than expected in March as strength in housing was offset by continued weakness in outlays on nonresidential structures and public projects.

© Reuters/Lucas Jackson
FILE PHOTO: A home under construction stands behind a “sold” sign in a new development in York County, South Carolina

The Commerce Department said on Monday that construction spending gained 0.2% after falling 0.6% in February.

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Economists polled by Reuters had forecast construction spending surging 1.9%. Construction spending, which accounts for about 4% of gross domestic product, increased 5.3% on a year-on-year basis in March.

The government reported last week that the economy grew at a 6.4% annualized rate last quarter. That was the second-fastest GDP growth pace since the third quarter of 2003 and followed a 4.3% rate in the fourth quarter.

Tepid construction spending likely has no impact on economists’ expectations for double-digit GDP growth in the second quarter, fueled by massive fiscal stimulus and improving public health as more Americans get vaccinated against COVID-19.

Spending on private construction projects rose 0.7% in March, lifted by investment in single-family homebuilding. There is strong demand for housing but supply has lagged amid expensive building materials as well as land and labor shortages. That followed a 0.3% drop in February.

Spending on residential projects surged 1.7% in March after edging up 0.1% in February.

But outlays on private nonresidential construction like gas and oil well drilling fell 0.9% in March. Business investment in nonresidential structures fell in the first quarter for the sixth straight quarter as a rebound in mining exploration, shafts and wells was offset by a drop in commercial and healthcare buildings.

Spending on public construction projects dropped 1.5% in March after declining 1.6% in February. State and local government outlays decreased 1.4%, while federal government spending declined 2.1%.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)