By Lucia Mutikani
Reuters

WASHINGTON (Reuters) – U.S. construction spending edged up in May despite the Middle East conflict constraining homebuilding.

The Commerce Department’s Census Bureau reported that construction spending rose 0.1% after a downwardly revised 0.3 percent increase in April. Economists polled by Reuters had forecast construction spending gaining 0.1 percent after a previously reported 0.4% increase in April.

Construction spending fell 1.5 percent on a year-over-year basis in May. Spending on private construction projects was unchanged after rising 0.3% in the prior month. Investment in residential construction increased 0.3 percent, reflecting renovations.

Spending on new single-family housing projects dropped 0.1 percent. It tumbled 4.0 percent year-on-year in May.

The U.S.-Israeli war with Iran boosted oil prices, driving up inflation and mortgage rates. The average rate on the popular 30-year fixed-rate mortgage has increased by about 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed.

Spending on multi-family housing units, which account for a small share of the housing market, dipped 0.1 percent in May.

Investment in private nonresidential structures such as power plants and factories declined 0.3 percent in May. Spending on factory construction dropped 1.3 percent, while outlays on power plants eased 0.1 percent, despite a surge in the construction of data centers to support artificial intelligence.

Investment in public construction projects increased 0.5 percent after a similar gain in April. State and local government construction spending rose 0.4 percent in May while outlays on federal government projects jumped 1.3 percent, likely boosted by the building of detention centers as part of an immigration crackdown.

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