U.S. construction spending took a hit in May, as businesses and homebuilders pulled back on projects due to stubbornly high interest rates.
Government spending, however, rose slightly from the prior month.
The Commerce Department reported Monday that spending on construction projects fell 0.1 percent to an annual pace of $2.1 trillion, missing Wall Street’s expectations of a 0.2 percent rise.
This drop signals a slowdown in economic activity, given that construction spending covers everything from housing to highways.
Adding to the gloom, April’s construction spending figure was revised up to 0.3 percent from an initial report of a 0.1 percent decline.
Despite the monthly dip, construction spending has climbed 6.4 percent over the past year.
In the residential sector, private residential construction saw a 0.2 percent decrease in May. Single-family home construction dropped 0.7 percent, while multifamily construction remained unchanged.
One exception to the decline was manufacturing, which has been boosted by government subsidies in the Inflation Reduction Act and the CHIPS Act. Private sector manufacturing construction spending rose 1.3 percent and is up more than 20 percent from a year ago.
Government spending rose 0.5 percent, with most categories of public sector construction rising. The largest category of public construction spending—highways and streets—declined by 0.5 percent. But this was more than offset by increases in spending on educational facilities, public transportation, and seware and waste disposal.
The figures are seasonally adjusted but not adjusted for inflation.