Washington – The U.S. Commerce Department’s Census Bureau released data on Thursday showing that total construction spending increased by 0.9% in August, reversing a modest 0.1% decline that had been reported for July. Economists surveyed by Reuters had expected the figure to be flat after a previously reported 0.5% drop in July.
Non‑residential projects lead the rebound
Private construction outlays rose 1.1% in August after a 0.2% dip in July. Investment in non‑residential structures grew 1.0%, with spending on power‑plant projects up 0.9% and office‑building work soaring 4.6% month‑over‑month. These gains helped offset weaker performance in the residential sector.
Residential construction shows modest growth
Spending on residential projects increased 1.1% in August, a rise that analysts attribute largely to renovation activity. Outlays for single‑family housing rose 0.2%, although they remain 3.5% lower than a year earlier. Multi‑family housing, which represents a smaller share of the market, posted a 0.2% increase.
Mortgage rates weigh on homebuilding demand
The average rate on a 30‑year fixed‑rate mortgage climbed more than 100 basis points since the conflict that began in late February, reaching 7.03% last week – the highest level since January 2025, according to Freddie Mac data. Higher borrowing costs have dampened demand for new homes and left a surplus of unsold inventory.
Public‑sector construction remains steady
Investment in public construction projects rose 0.2% in August after a 0.1% gain in July. State and local government construction spending advanced 0.3%, while federal government outlays fell 0.7%.
Year‑over‑year perspective
Despite the monthly increase, construction spending was down 1.7% on a year‑over‑year basis in August. The mixed picture reflects strong performance in certain non‑residential categories alongside continued challenges in the housing market.
Overall, the August data suggest that while the construction sector is resilient in areas such as office and power‑plant development, higher mortgage rates continue to constrain residential building activity. The trend will be closely watched as policymakers consider how to balance inflation‑related pressures with the need for ongoing infrastructure investment.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
