U.S. construction spending unexpectedly falls in May
U.S. construction spending unexpectedly fell in May as single-family homebuilding stalled, more evidence that the Federal Reserve’s aggressive monetary policy tightening was slowing the economy.
The Commerce Department said on Friday that construction spending slipped 0.1% in May after increasing 0.8% in April. Economists polled by Reuters had forecast construction spending would rise 0.4%. Construction spending increased 9.7% on a year-on-year basis in May.
Spending on private construction projects was unchanged in May after advancing 1.1% in April. Investment in residential construction rose 0.2%, though spending on both single-family and multi-family housing projects was flat.
The average contract rate on a 30-year fixed-rate mortgage has jumped close to 6% as the Fed raises interest rates to tame inflation.
Data last month showed consumer spending rose modestly in May while housing starts, building permits and factory output softened, heightening risks of a recession.
The U.S. central bank in June raised its policy rate by three-quarters of a percentage point, its biggest hike since 1994. Another similar-sized rate hike is expected in July. The Fed has increased its benchmark overnight interest rate by 150 basis points since March.
Investment in private non-residential structures like gas and oil well drilling fell 0.4% in May.
Spending on public construction projects declined 0.8% after slipping 0.3% in April. Outlays on state and local government construction projects dropped 0.8%, while federal government spending tumbled 1.7%.