US construction spending fell again in May

WASHINGTON – U.S. construction spending fell for a second month in May, with weakness hitting all areas of building.

Construction spending declined 0.8 per cent in May following a 2 per cent tumble in April, the Commerce Department reported Friday. The April figure had been the biggest monthly setback in five years.

The back-to-back declines in overall construction caught analysts by surprise. They had been expecting a rebound following the big drop in April. Economists, however, still expect construction to contribute meaningful growth to the overall economy this year.

Spending on housing was flat as a 1.8 per cent advance in apartment construction was offset by a 1.3 per cent fall in single-family activity. Nonresidential construction was down 0.7 per cent, with a contraction in the category that includes shopping centres.

Government activity dropped 2.3 per cent to mark the third straight decline.

Housing construction has been one of the bright spots for the economy, which got off to a weak start this year. Gross domestic product grew at a lacklustre annual rate of just 1.1 per cent in the January-March quarter.

Economists are forecasting GDP growth will rebound to around 2.5 per cent in the April-June period.

They expect solid growth in the second half of this year but are concerned U.S. output may be held back a bit by the decision of British voters last week to support an exit from the European Union. That vote has pushed the dollar higher against other currencies, which could cut into American export sales.

The drop in construction activity in May left total activity at a seasonally adjusted annual rate of $1.14 trillion, up 2.8 per cent from a year ago.

The flat reading for residential construction left this category at $451.9 billion, 5.4 per cent higher than a year ago. Nonresidential construction was $407.4 trillion, up 3.9 per cent from a year ago. Public construction stood at $284 billion, 2.6 per cent below the level in May 2015.

The housing bubble burst in 2006 with construction falling for the next five years before it began to rise again in 2012.

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