US construction spending rises in May

U.S. construction spending rose in May, but higher mortgage rates stemming from conflict in the Middle East limited home construction.

The Census Bureau of the Ministry of Commerce reported on Wednesday (1st) that construction spending increased 0.1%, following a downwardly revised increase of 0.3% in April.

Economists consulted by Reuters predicted an increase of 0.1%, after a previously reported increase of 0.4% in April.

Construction spending in May fell 1.5% compared to the same month last year. Spending on private construction projects remained unchanged after rising 0.3% in the previous month.

Investment in residential construction increased 0.3%, reflecting renovations.

Spending on new single-family housing projects fell 0.1%. In May, they registered a drop of 4.0% compared to the same month of the previous year.

The US and Israeli war against Iran has boosted oil prices, raising inflation and mortgage rates.

The average rate on the popular 30-year fixed mortgage has risen about 50 basis points since the conflict began in late February, according to data from mortgage finance agency Freddie Mac.

The average was 6.49% last week. Spending on multifamily housing units, which represent a small portion of the housing market, fell 0.1% in May.

Investment in private non-residential structures, such as power plants and factories, decreased by 0.3% in May.

Spending on factory construction fell 1.3%, while spending on power plants fell 0.1%, despite an increase in the construction of data centers to support artificial intelligence.

Investment in public construction projects increased by 0.5%, the same rate as in April.

Construction spending by state and local governments rose 0.4% in May, while spending on federal government projects rose 1.3%, likely driven by the construction of detention centers as part of an immigration crackdown.

Source: CNN