Construction spending dropped to a seven-month low in March as public outlays recorded their largest drop since 2006, which could cause the first-quarter economic growth estimate to be trimmed.
Construction spending fell 1.7 percent to an annual rate of $856.72 billion, the lowest level since August, the Commerce Department said on Wednesday. Spending had increased 1.5 percent in February.
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Economists polled by Reuters had expected construction spending to rise 0.7 percent in March.
The across-the-board decline in construction spending was the latest indication that the economy exited the first quarter with less momentum and suggested tighter fiscal policy was starting to take a toll.
The report also raised the risk of a downward revision to the government's moderate growth estimate of a 2.5 percent rate for the first quarter.
Construction spending in March was depressed by a 4.1 percent drop in public construction projects to a 6 1/2-year low. The percentage decline was the largest since March 2002.
Outlays on federal government projects fell 1.7 percent. State and local spending, which is far larger than federal projects, tumbled 4.3 percent, the biggest drop since March 2002.
Spending on private construction projects also fell, slipping 0.6 percent. Residential spending rose 0.4 percent, but those gains were offset by a 1.5 percent drop in spending on private nonresidential structures.
(Reporting By Lucia Mutikani; Editing by Neil Stempleman)