Construction spending took a slight dip in April as both U.S. companies and the government hit the brakes on projects nationwide, feeling the squeeze of high interest rates.
The Commerce Department reported Monday that spending on construction projects edged down 0.1 percent to a $2.1 trillion annual rate. This unexpected decline fell short of Wall Street’s expectations, as economists had anticipated a 0.2 percent rise in construction spending for the month.
This was the second consecutive month of declining construction spending. Despite the recent dip, construction spending over the past year has surged by 10 percent.
On the residential front, private residential construction inched up 0.1 percent in April. Within this sector, single-family home construction saw a modest rise of 0.1 percent, while multifamily construction slipped by 0.3 percent.
The resilience of the single-family home market has been a surprise to many analysts who thought higher interest rates on home loans would weigh more heavily on demand. Instead, the high rates have hurt the supply of existing homes on the market, pushing up demand for new homes and construction.
Compared with a year ago, residential construction is up eight percent. Single family construction, the biggest part of the residential market, is up 20.4 percent. Apartment construction is up 2.3 percent.
Spending on manufacturing plants rose 0.3 percent and is up 17 percent from a year ago. This has been driven in large part by government subsidies for high tech manufacturing facilities and demand for “re-shoring” of production.
Spending on commercial properties—which includes all retail buildings, warehouses, parking lots and garages but excludes offices and hotels—fell 1.1 percent. After manufacturing, this is the second largest category of nonresidential private sector construction in the U.S. Commercial property construction spending is flat with a year ago.
Government spending on construction dropped 0.2 percent for the month but it is up 16.7 percent from a year ago.