US construction spending fell 2.1% in May

WASHINGTON — U.S. construction spending fell 2.1% in May with both home building and nonresidential activity declining.

The Commerce Department said on Wednesday the May decline followed an even larger 3.5% fall in April. Construction spending was also down in March, falling 0.3%.

The construction industry has been rocked by the shutdowns triggered by the coronavirus pandemic and with cases rising again in many parts of the country there are concerns that construction could see further declines in coming months.

Economists, who had been expecting a slight improvement in the May activity, said the construction industry was likely to face more headwinds in coming months as the country deals with the uncertainty caused by the cornavirus.

“The data are consistent with our expectations for sharp declines in investment in the second quarter,” said Nancy Vanden Houten, lead U.S. economist for Oxford Economics.

She predicted some rebound in construction in the second half of the year but she said any overall gains would be held back by expected declines in government spending “as state and local budgets are squeezed by the pandemic.”

Construction of homes dropped 4% in May with single-family homes down 8.5% while apartment construction rose 2.3%.

Nonresidential construction declined 2.4% with office building down 1.1% and hotel construction falling 3.5%. The category that includes shopping centres fell 1.2%.

Spending on government construction projects rose 1.2% in May.

The various changes left construction spending up a slight 0.3% from a year ago at a seasonally adjusted annual rate of $1.36 trillion.

Martin Crutsinger, The Associated Press