US construction spending unexpectedly falls in December

White House Council of Economic Advisers Chair Kevin Hassett on the U.S. economy's 2.6 percent growth in the fourth quarter and the outlook for the economy through the rest of 2019.

WASHINGTON, March 4 - U.S. construction spending unexpectedly fell in December as investment in both private and public projects dropped, further evidence the economy lost momentum at the tail end of 2018.

The Commerce Department said on Monday that construction spending declined 0.6 percent after an unrevised 0.8 percent increase in November.

Economists polled by Reuters had forecast construction spending rising 0.2 percent in December. The report extended the run of weak economic December data, that has included retail sales, housing starts, trade and home sales.

Construction spending increased 1.6 percent on a year-on-year basis in December. It rose 4.1 percent in 2018, the weakest reading since 2011. The release of the December report was delayed by a five-week partial shutdown of the government that ended on Jan. 25.

December's weak construction spending data could have an impact on the government's fourth-quarter gross domestic product estimate published last Friday.

The government reported the economy grew at a 2.6 percent annualized rate in the October-December period, slowing from the third quarter's brisk 3.4 percent pace.

In December, spending on private construction projects fell 0.6 percent after surging 1.3 percent in November. Investment in private residential projects tumbled 1.4 percent after rebounding 3.4 percent in November. The housing market has been weighed down by higher mortgage rates, expensive building materials as well as land and labor shortages. Residential investment contracted 0.2 percent in 2018.

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Spending on private nonresidential structures, which includes manufacturing and power plants, gained 0.4 percent in December after declining 1.1 percent in November. Spending on nonresidential structures contracted in both the third and fourth quarters.

Investment in public construction projects fell 0.6 percent in December to an eight-month low after decreasing 1.0 percent in November. Spending on federal government construction projects plunged 2.2 percent after rising 0.3 percent in November.

Investment in state and local government construction projects fell 0.5 percent in December to an eight-month low after dropping 1.1 percent in the prior month.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)