WASHINGTON, Oct 1 (Reuters) – US construction spending unexpectedly surged in August, boosted by outlays on nonresidential structures like offices and power plants, but the trend remained weak as higher mortgage rates weighed on homebuilding.
The Commerce Department’s Census Bureau said on Thursday that construction spending jumped 0.9% after an upwardly revised 0.1% dip in July. Economists polled by Reuters had forecast construction spending unchanged in August after a previously reported 0.5% decline in July.
Construction spending dropped 1.7% on a year-over-year basis in August. Spending on private construction projects shot up 1.1% in August after falling 0.2% in July. Investment in private nonresidential structures increased 1.0% in August. Spending on power plants rose 0.9% and outlays on office projects soared 4.6%.
Investment in residential projects surged 1.1% in August, likely reflecting renovations. Outlays on single-family housing projects rose 0.2%, but dropped 3.5% on a year-over-year basis.
The average rate on a 30-year fixed-rate mortgage has soared more than 100 basis points since the US-Israeli war with Iran started in late February, weighing on demand and leaving an overhang of unsold new homes on the market.
It averaged 7.03% last week, the highest level since January 2025, data from mortgage finance firm Freddie Mac showed. Spending on multi-family housing units, which account for a small share of the housing market, increased 0.2% in August.
Investment in public construction projects rose 0.2% after edging up 0.1% in July. State and local government construction spending advanced 0.3%, while outlays on federal government projects declined 0.7%.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci )
