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US construction spending rises in October amid renovations

US construction spending rises in October amid renovations
US construction spending rises in October amid renovations

Construction spending in the United States increased more than expected during October, with home renovations likely driving the increase, while other areas of construction activity was weak.

The Census Bureau of the Commerce Department reported on Wednesday that construction expenditures rose 0.5% in October after dropping?0.6% during September. The economists polled had predicted construction spending to rise by 0.1% in October. In October, spending fell 1.0% on an annual basis.

The 43-day shutdown of the government delayed the data. The spending on private construction projects increased by 0.6% in October, after falling 0.9% in September.

After a 1.4% drop in September, residential construction investment jumped 1.3%. This was despite a drop of 1.3% in new single-family projects. The spending on?multi-family housing units, which make up a small part of the housing market fell by 0.2%.

Renovations are likely to be the reason for the rise in residential expenditures. The cost of building materials and labor has increased due to higher mortgage rates, tariffs on imported goods as well as the increase in mortgage?rates.

A glut of new housing is also preventing builders from starting new projects. Mortgage rates have fallen in recent weeks, after the Trump Administration began purchasing mortgage-backed securities. This could encourage home purchases and reduce housing inventory.

However, rising long-term U.S.?bond?yields in the face of renewed trade tensions with Europe and Washington could limit declines. Mortgage rates are based on the yield of the 10-year U.S. Treasury, which is rising 'after President Donald Trump threatened to slap tariffs against nations who do not support his bid to buy Greenland. Residential investment has been a drag for the gross domestic product in three consecutive quarters.

In October, investment in nonresidential structures such as offices and factories dropped 0.2%. The spending on nonresidential buildings has been declining for seven quarters in a row, but the construction of data centres amid a boom in artificial intelligence could help.

After increasing by 0.4% in September, investment in public construction projects increased 0.1%.

The October construction expenditures of state and local governments increased by 0.3%, while federal government spending decreased by 2.0%. Lucia Mutikani, Andrea Ricci and Andrea Ricci (Reporting)

(source: Reuters)