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US construction spending drops again in May

The U.S. Construction spending dropped in May due to higher mortgage rates, and an increase in inventory.

The Census Bureau of the Commerce Department reported on Tuesday that construction expenditures dropped by 0.3%, following a downwardly revised 0.2% drop in April.

Economists surveyed by predicted that construction spending would decline 0.2%, following a 0.4% drop in April. In May, spending fell 3.5% compared to the same period last year.

The amount spent on private construction projects fell by 0.5%. Residential construction investment also fell 0.5%. Outlays for new single-family housing projects dropped 1.8%.

The Federal Reserve has paused its cycle of interest rate reductions because tariffs on imported products have increased economic uncertainty. The new housing inventory has reached levels not seen since late 2007.

In a survey conducted by the National Association of Home Builders last month, sentiment among homebuilders of single-family homes plummeted in June to its lowest level in two and a half years. It predicted a drop in single-family home starts this year.

In May, the expenditures on multi-family housing units remained unchanged. Investments in non-residential private structures such as offices and factories fell 0.4%.

The spending on public construction projects increased by 0.1%. The spending on construction by state and local governments was flat, but federal government expenditures increased 1.0%. Lucia Mutikani, reporting; Paul Simao, editing.

(source: Reuters)