Key facts
- US construction spending increased 0.9% in August.
- Economists had forecast construction spending to be unchanged.
- Private construction projects rose 1.1% in August.
- Spending on office projects increased 4.6% in August.
- Residential construction spending rose 1.1% in August.
- The average rate on a 30-year fixed-rate mortgage was 7.03% last week.
US construction spending unexpectedly surged in August, driven by increased outlays on nonresidential structures such as offices and power plants. The Commerce Department's Census Bureau reported that overall construction spending rose 0.9% in August, surpassing economists' expectations of no change and following a revised 0.1% dip in July.
Spending on private construction projects saw a significant increase of 1.1% in August. Within this category, investment in private nonresidential structures grew by 1.0%, with outlays on office projects soaring by 4.6% and spending on power plants rising by 0.9%.
Investment in residential projects also saw a notable increase of 1.1% in August, which may reflect renovation activity. However, spending on single-family housing projects, a key indicator of the housing market's health, only rose 0.2% and declined 3.5% on a year-over-year basis. This weakness is attributed to higher mortgage rates.
The average rate for a 30-year fixed-rate mortgage reached 7.03% last week, its highest level since January 2025, according to data from Freddie Mac. This sustained high level of borrowing costs is dampening demand for new homes and contributing to an overhang of unsold properties.
Public construction projects saw a modest increase of 0.2% in August, with state and local government spending advancing 0.3%, while federal government outlays declined 0.7%.