US construction spending dives in June on single-family housing weakness
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US construction spending tumbled in June as outlays on single-family homebuilding declined sharply amid rising mortgage rates.
The Commerce Department said on Monday (Aug 1) that construction spending dropped 1.1 per cent in June after gaining 0.1 per cent in May. Economists polled by Reuters had forecast construction spending would rise 0.1 per cent.
Construction spending increased 8.3 per cent on a year-on-year basis in June. Spending on private construction projects decreased 1.3 per cent after increasing 0.2 per cent in May.
Investment in residential construction dropped 1.6 per cent, with spending on single-family projects plunging 3.1 per cent. Outlays on multi-family housing projects increased 0.4 per cent.
The housing market is cooling as higher mortgage rates reduce affordability for buyers.
Residential spending contracted at its steepest pace in 2 years in the second quarter. That contributed to gross domestic product declining at an annualized rate of 0.9 per cent last quarter after shrinking at a 1.6 per cent pace in the January-March quarter.
The Federal Reserve last week raised its policy rate by another 3-quarters of a percentage point. It has now hiked that rate by 225 basis points since March.
Investment in private non-residential structures like gas and oil well drilling fell 0.5 per cent in June. Outlays on non-residential structures have declined for 5 straight quarters.
Spending on public construction projects dropped 0.5 per cent after falling 0.7 per cent in May. Investment in state and local government construction projects slipped 0.6 per cent, while federal government spending increased 1.2 per cent. REUTERS
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