Key facts
- U.S. construction spending fell 0.5% in July to $2.158 trillion.
- This marks the lowest level since October 2023.
- Residential construction investment dropped 1.3%, driven by a 3.2% decrease in single-family housing projects.
- Private nonresidential construction saw a 0.4% increase, while public construction spending declined 0.2%.
- The average 30-year fixed-rate mortgage is near a one-year high of 6.66%.
U.S. construction spending unexpectedly decreased in July, reaching its lowest level in nearly three years, primarily due to the impact of elevated mortgage rates on single-family homebuilding. The Commerce Department's Census Bureau reported that construction spending fell 0.5% to a seasonally adjusted annual rate of $2.158 trillion, the lowest since October 2023. This decline surpassed economists' expectations, who had forecast no change in spending.
Spending on private construction projects contracted by 0.5% in July, with residential construction seeing a significant drop of 1.3%. Investment in single-family housing projects plummeted by 3.2%, contributing to a 6.5% year-over-year decrease in this segment. The housing market is further pressured by an excess of unsold homes and mortgage rates hovering near a one-year high of 6.66% for the 30-year fixed-rate mortgage.
Conversely, spending on multi-family housing units saw a modest increase of 0.2%. Investment in private nonresidential structures, such as power plants and factories, rose by 0.4%. However, outlays on factory projects declined 0.8% in July and a substantial 21.7% year-over-year, indicating fading momentum from the 2022 CHIPS and Science Act, which has not been fully offset by artificial intelligence buildouts. Nonresidential structures have now contracted for ten consecutive quarters.
Public construction projects experienced a 0.2% decrease in July. While state and local government construction spending remained unchanged, federal government project outlays declined by 3.5%.