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US construction spending falls for second straight month in February

FILE PHOTO: Residential home construction continues as California faces a housing shortage

WASHINGTON(Reuters) - U.S. construction spending unexpectedly fell in February as strength in single-family homebuilding was more than offset by weaknesses in nonresidential and public projects.

The Commerce Department said on Monday that construction spending dropped 0.3% after an unrevised 0.2% decline in January. Economists polled by Reuters had forecast construction spending rebounding 0.7%. Construction spending increased 10.7% year-on-year in February.

Spending on private construction projects was unchanged for a second straight month in February. Investment in residential construction rose 0.7% after gaining 0.1% in the prior month.

Outlays on new single-family construction projects jumped 1.4%, boosted by tight housing supply. Recent government data showed there were 757,000 housing units for sale in the fourth quarter, well below the 1.145 million units before the COVID-19 pandemic. Outlays on multi-family housing projects dipped 0.2% in February, likely as builders worked through a large backlog.

Outlays on private non-residential structures like factories dropped 0.9%. The broad decline in spending was led by a 2.5% plunge in amusement and recreation projects. Investment in healthcare facilities decreased 1.9% while spending on commercial buildings declined 1.7%. Spending on manufacturing construction projects fell 0.6%.

Spending on structures was one of the contributors to the economy's 3.4% annualized growth pace in the fourth quarter.

Investment in public construction projects dropped 1.2% after falling 0.7% in January.

State and local government spending tumbled 1.1% and outlays on federal government projects plummeted 2.1%.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)