U.S. construction spending increased in August, lifted by outlays on single- and multi-family housing, though mortgage rates at nearly 23-year highs could slow momentum.
The Commerce Department said on Monday that construction spending rose 0.5%. Data for July was revised higher to show construction spending advancing 0.9% instead of 0.7% as previously reported. The increase in spending in August was in line with economists' expectations.
Construction spending jumped 7.4% on a year-on-year basis in August. Spending on private construction projects rose 0.5%, with investment in residential construction rising 0.6% after increasing 1.6% in the prior month. Private construction spending gained 1.2% in July.
A dearth of homes available for sale is fueling new construction, but higher mortgage rates pose a challenge.
The rate on the popular 30-year fixed mortgage averaged
7.31% last week, the highest since December 2000, from 7.19% the prior week, according to data from mortgage finance agency Freddie Mac.
The construction spending report showed outlays on multi-family housing projects rose 0.6% in August. There is limited room for further gains as the stock of multi-family housing under construction is near record highs. Spending on new single-family construction projects rose 1.7%.
Spending on private non-residential structures like factories climbed 0.3% in August. Spending on manufacturing construction projects shot up 1.2%. Efforts by the Biden administration to bring semiconductor manufacturing back to the United States are boosting factory construction.
Spending on public construction projects rebounded 0.6% after dipping 0.1% in July. State and local government spending was unchanged while outlays on federal government projects soared 7.8%.
