U.S. construction spending inches higher in June

Residential home construction continues as California faces a housing shortage

WASHINGTON (Reuters) – U.S. construction spending rose by 0.1% in June, the Commerce Department said on Monday, as an increase in private projects was offset by a fall in public sector building.

Construction spending, which accounts for less than 4% of U.S. gross domestic product, increased by 8.2% on a year-on-year basis in June after falling 0.2% in May, data showed.

Economists polled by Reuters had forecast construction spending rising by 0.4% in June.

Spending on private construction projects climbed 0.4%, with outlays on residential projects increasing 1.1%. Single-family homebuilding spending surged 1.8%, after outlays on residential projects rose 0.3% in May.

The government reported last week that residential spending contracted in the second quarter, weighed down by lower broker commissions and other ownership transfer costs because of a decline in home sales.

Although demand for housing remains robust, a rise in the cost of building materials, especially framing lumber, are constraining builders’ ability to ramp up construction and close an inventory gap, driving up home prices and crimping sales.

Investment in private non-residential construction like gas and oil well drilling fell 0.7% in June. Business spending on non-residential structures fell in the second quarter led by declines in commercial and healthcare structures. Private construction outlays was unchanged in May.

Spending on public construction projects dropped 1.2% in June, after declining 0.8% in May.

(Reporting by Lucia Mutikani; Editing by Alexander Smith)