WASHINGTON (Reuters) - U.S. construction spending unexpectedly fell in May as investment in private construction projects dropped to its lowest level in nearly 2-1/2 years.
The Commerce Department said on Monday construction spending declined 0.8%, the biggest drop since last November. Data for April was revised to show construction outlays rising 0.4% instead of being unchanged as previously reported.
Economists polled by Reuters had forecast construction spending would rise 0.1% in May. Construction spending fell 2.3% on a year-on-year basis in May.
Weak construction spending was the latest indication that economic growth slowed in the second quarter after getting a temporary boost from exports and an accumulation of inventory.
Consumer spending is rising moderately, while the pace of job and wage growth has slowed. In addition, manufacturing and the housing market are struggling and the goods trade deficit widened in May.
Construction spending surged in the first quarter, boosted by increased investment in roads and highways by state and local governments.
Spending on private construction projects dropped 0.7% in May to the lowest level since January 2017. That followed a 1.0% decline in the prior month. Private construction outlays also fell in March.
Investment in private residential projects fell 0.6% in May to its weakest level since December 2016, after a 0.6% decrease in April. Private residential construction outlays have now declined for five straight months.
Homebuilding has remained weak even as mortgage rates have dropped sharply from last year's high levels. Spending on residential construction has contracted for five straight quarters.
Spending on private nonresidential structures, which includes manufacturing and power plants, decreased 0.9% in May after plunging 1.4% in the prior month.
In May, investment in public construction projects fell 0.9% after surging 4.5% in April. Spending on state and local government construction projects slipped 0.6% after jumping 4.3% in April. Outlays on federal government construction projects tumbled 5.2% in May after rising 7.3% in the prior month.