US construction spending increases in line with expectations in December

WASHINGTON, Feb 27 (Reuters) – U.S. construction spending increased in December, lifted by a rebound in single-family homebuilding as well as ongoing strength in home renovations.

The Commerce Department’s Census Bureau said on Friday that construction spending rose 0.3% after falling 0.2% in November. The increase was in line with economists’ expectations. Construction spending slipped 0.4% year-on-year in December. The data was delayed by last year’s government shutdown.

Spending on private construction projects rose 0.5% in December after easing 0.2% in November. Investment in residential construction increased 1.5% after being unchanged in November. Spending on new single-family housing projects rebounded 1.5%. Spending on multi-family housing units, which account for a small share of the housing market, rose 0.1%.

Renovations increased further. Despite December’s acceleration, homebuilding remained sluggish amid higher mortgage rates, more expensive building materials because of tariffs on imports, and labor shortages.

A decline in mortgage rates in recent weeks could spur construction, though building lots remain scarce. Residential investment has declined for four straight quarters.

Spending on private nonresidential structures like offices and factories dropped 0.7% in December. Spending on nonresidential structures has contracted for eight consecutive quarters, despite a surge in the construction of data centers to support artificial intelligence.

Investment in public construction projects decreased 0.5% after falling 0.2% in November. State and local government construction spending declined 0.7% in December, but outlays on federal government projects increased 1.6%.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)