US Construction Spending Declines in August Due to Single-Family Homebuilding, According to Reuters

Construction Spending in the U.S. Sees Unexpected Drop in August

WASHINGTON (Reuters) – U.S. construction spending saw an unexpected decline in August, driven by a significant decrease in investment for single-family housing projects. However, the recent decline in borrowing costs may provide a boost to construction activities in the upcoming months.

According to the Commerce Department’s Census Bureau, construction spending decreased by 0.1% in August, following a downward revision that showed a 0.5% drop in July. Economists had anticipated a slight increase of 0.1% for August after previously observing a 0.3% decline.

Year-over-year, construction spending rose by 4.1% in August.

Private construction spending fell by 0.2% in August after a 0.7% decline in July. Notably, residential construction investment dropped by 0.3%, with new single-family project expenditures plummeting by 1.5%.

The increasing availability of new homes in the market is leading builders to hesitate in starting new residential projects. Furthermore, potential homebuyers are waiting for advantageous mortgage rates, potentially limiting the positive effects of lower borrowing costs in the short term. The Federal Reserve recently cut interest rates for the first time in four years, with further reductions expected in the coming months.

Currently, mortgage rates are at their lowest levels in two years, while the inventory of new homes matches figures last observed in early 2008.

Investment in multi-family housing units also declined, decreasing by 0.4%, although spending on home renovations increased during the same period.

Investment in private non-residential structures, including offices and factories, fell by 0.1%.

In contrast, spending on public construction projects rose by 0.3%, following a 0.5% increase in July. Spending by state and local governments grew by 0.3%, while federal government project outlays rose by 0.5%.