U.S. June Construction Spending Unexpectedly Declines 0.1%
Claire Weston
U.S. construction spending fell an unexpected 0.1% in June, defying economists' forecast of a 0.2% gain; the 30-year mortgage rate hit 6.66%, a one-year high, keeping housing demand under pressure.
Why is this called a "surprise"?
Economists surveyed by Reuters expected a 0.2% monthly gain. The actual reading was a 0.1% decline — the opposite direction.
May's figure was also revised down, from +0.1% to flat.
This means → two straight months came in weaker than first reported. The construction slowdown may have started earlier than markets assumed.
How are high mortgage rates dragging on construction?
The 30-year fixed mortgage rate averaged 6.66% last week, a one-year high.
That rate has climbed nearly 70 basis points since late February, before the U.S.–Israel strikes on Iran.
In plain terms = higher monthly payments discourage buyers, so developers break ground on fewer projects.
Year on year, June construction spending fell 3.2% — a sizable drop.
Residential vs. non-residential — which fell harder?
Residential investment dropped 0.3% month on month: single-family spending fell 0.6% (down 3.3% year on year), and multifamily spending fell 0.7%.
Private non-residential construction (power plants, factories) edged up 0.1%, but factory spending alone fell 1.2%.
This reflects a longer trend: non-residential investment has contracted for 10 consecutive quarters. Even the factory-building boom is losing steam under high rates.
Can public construction fill the gap?
June public construction spending was flat, after a 0.6% gain in May.
State, local, and federal government project spending all showed no change.
This means → the government side is not accelerating, offering no offset to private-sector weakness.
Didn't residential investment rebound in Q2?
Residential investment did rebound in Q2 overall, after five straight quarters of contraction.
But the rebound was driven by renovation spending, not new construction — new-home building continued to slide.
In plain terms = more homeowners spent money on upgrades, not more buyers purchasing new homes. Whether June's single-month reading marks a real trend reversal still depends on the data ahead.
Content is for reference only, not financial advice.