US construction spending unexpectedly falls in October

WASHINGTON, Dec 2 (Reuters) - U.S. construction spending unexpectedly fell in October as investment in private projects tumbled to its lowest level in three years, offering a cautionary note on the economy despite a recent string of upbeat reports.

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The Commerce Department said on Monday construction spending dropped 0.8%. Data for September was revised to show construction outlays declining 0.3% instead of rising 0.5% as previously reported.

Economists polled by Reuters had forecast construction spending gaining 0.4% in October. Construction spending increased 1.1% on a year-on-year basis in October.

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The report came on the heels of recent upbeat October data on the goods trade deficit, housing and manufacturing that led economists to boost their gross domestic product estimates for the fourth quarter.

In October, spending on private construction projects dropped 1.0% to $956.3 billion, the lowest level since October 2016, after declining 1.1% in September. It was held down by a 0.9% decrease in spending on private residential projects. Outlays on residential construction dropped 1.1% in September.

The second straight monthly drop in residential construction is despite lower mortgage rates.

Mortgage rates have declined as the Federal Reserve has cut interest rates three times this year, softening the hit on the economy from a 16-month trade war between the United States and China, as well as slowing global growth.

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Spending on private nonresidential structures, which includes manufacturing and power plants, plunged 1.2% in October to the lowest level since January 2018.

Investment in private nonresidential structures fell 1.0% in September. Outlays on private nonresidential structures have been depressed by a manufacturing downturn due to trade tensions and cheaper energy products.

Investment in nonresidential construction fell at its steepest pace in nearly four years in the third quarter. That contributed to business investment contracting for a second straight quarter.

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Spending on public construction projects slipped 0.2% after jumping 1.9% in September. Spending on state and local government construction projects fell 0.3%. It surged 2.0% in September.

Outlays on federal government construction projects increased 0.6% in October to the highest level since May 2013. That followed a 0.7% rise in September. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)