U.S. construction spending unexpectedly decreased in January due to reduced single-family homebuilding investment.
Construction spending fell 0.1% in January after falling 0.7% in December, according to data released by the Commerce Department on Wednesday. A 0.2% increase in construction spending was predicted by economists surveyed by Reuters. On a yearly basis, construction spending grew by 5.7% in January.
After falling by 0.8% in December, spending on private construction projects remained constant. Spending on single-family home projects declined by 1.7%, while investment in residential building fell by 0.6%. Spending on multi-family housing developments increased by 0.4% due to the high demand for rental properties.
The Federal Reserve’s vigorous tightening of monetary policy has severely hurt the housing market, as evidenced by the longest period of falling residential investment since 2009.
But, there are indications that the housing market is beginning to stabilise, with new house sales reaching a 10-month high and pending home sales increasing by the most in more than 2-1/2 years in January. Yet, the rise in mortgage rates has resumed, which might prevent a recovery.
In January, U.S. construction spending on privately owned non-residential buildings, including drilling for gas and oil wells, climbed by 0.9%. Following a 0.2% decrease in December, spending on public construction projects decreased by 0.6%. While federal government construction spending increased by 8.6%, investment in state and municipal government construction projects fell by 1.4%.