U.S. construction spending dipped in February as investment in single-family homebuilding maintained its downward trend amid higher mortgage costs.
The Commerce Department said Monday that construction spending slipped 0.1% in February after increasing 0.4% in January. Economists polled by Reuters had forecast construction spending would be unchanged. Construction spending increased 5.2% on a year-on-year basis in February.
Spending on private construction projects was unchanged after gaining 0.2% in January.
Investment in residential construction fell 0.6%, with spending on single-family housing projects plunging 1.8%. Outlays on multi-family housing projects rose 1.4%, continuing to be supported by demand for rental housing.
The housing market has borne the brunt of the aggressive interest rate hikes delivered by the Federal Reserve in its battle to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
But the worst is likely over. Mortgage rates are trending down following the recent collapse of two U.S. regional banks that sparked fears of contagion in the banking sector. Nevertheless, the housing market is not out of the woods because credit conditions have tightened.
Outlays on private non-residential structures like gas and oil well drilling increased 0.7% in February.
Spending on public construction projects fell 0.2% after advancing 0.9% in January. Investment in state and local government construction projects dropped 0.3%, while federal government construction spending increased 1.1%.
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