Key facts
- U.S. construction spending fell 0.1% in June, contrary to economists' expectations of a 0.2% increase.
- Residential construction spending decreased by 0.3%, with single-family housing projects down 0.6%.
- The average 30-year fixed-rate mortgage reached a one-year high of 6.66% last week.
- Private nonresidential construction spending saw a slight increase of 0.1%.
- Public construction projects spending remained unchanged.
U.S. construction spending unexpectedly declined in June, with the Commerce Department's Census Bureau reporting a 0.1% drop. This figure fell short of the 0.2% increase anticipated by economists polled by Reuters. Construction spending was also revised to show it was unchanged in May, instead of a prior report of a 0.1% increase.
On a year-over-year basis, construction spending decreased by 3.2%. Spending on private construction projects eased 0.1%, primarily driven by a 0.3% decline in residential construction. Investment in new single-family housing projects fell 0.6%, marking a 3.3% decrease from the previous year. Multi-family housing unit spending declined 0.7%.
The downturn in residential construction is attributed to rising mortgage rates, with the average 30-year fixed-rate mortgage reaching a one-year high of 6.66% last week, an increase of nearly 70 basis points since late February. Despite the dip in new housing, renovations have seen an increase as higher borrowing costs deter home purchases.
Investment in private nonresidential structures saw a marginal increase of 0.1%, though spending on factory projects decreased by 1.2%. Investment in nonresidential structures has contracted for ten consecutive quarters. Public construction projects remained unchanged, with both state and local government outlays, as well as federal government projects, showing no change.