U.S. construction spending drops surprisingly in March

Construction spending in the U.S. dropped surprisingly in March. Construction spending fell 0.2 percent on a sequential basis, below consensus expectations of 0.4 percent. The fall in construction spending was driven by softness in public construction and private non-residential. In private construction, the residential component was up 1.2 percent sequentially, helped by single as well as multi-family construction spending.

However, non-residential private construction spending dropped 1.3 percent. Public construction spending fell 0.9 percent, with both residential spending and non-residential spending falling sequentially by 1.3 percent and 0.9 percent respectively.

The construction spending report for March has come much weaker than projected. However, when compared with the assumptions placed in the advances estimate of the first quarter GDP last week, it suggests more non-residential investment and more construction spending at the state and local government level, noted Barclays in a research report.