US construction spending unexpectedly falls in January

WASHINGTON, March 23 (Reuters) - U.S. construction ‌spending unexpectedly fell ​in ​January amid broad weakness in private projects, government data showed.

The Commerce Department's Census Bureau said on Monday that construction spending dropped 0.3% ‌after an upwardly revised 0.8% jump in December, which was the largest ⁠increase since April 2024.

Economists polled by Reuters had forecast construction spending would edge up 0.1%. Construction ‌spending rose 1.0% on a ‌year-over-year basis in January.

The Census Bureau is still catching up on data releases following delays caused by last year's government shutdown.

Spending on private construction projects ​fell 0.6% in January after increasing 1.0% in December. Investment in residential construction decreased 0.8% after soaring 2.5% in December, which partly reflected the impact of ⁠a rise in renovations. Spending on new single-family housing projects fell 0.2% as higher mortgage rates continue to ​constrain activity.

Though mortgage rates eased at the start of the year, they have been rising since the U.S.-Israeli war with Iran ​started at the end of February. The Middle ‌East conflict has boosted oil prices and U.S. Treasury yields amid mounting inflation fears.

The average rate on the popular 30-year fixed-rate ⁠mortgage has jumped to 6.22% from 5.98% on the eve of the war, data from Freddie Mac showed. Mortgage rates track the benchmark 10-year Treasury yield. Rising mortgage rates are ⁠adding to higher material and labor costs, which have risen because of import tariffs and ​an immigration crackdown.

Residential investment has declined for four straight quarters. Spending on multi-family housing units, which account for a small share of the housing market, fell 0.7% in January.

Spending on private ‌nonresidential structures like offices and factories dropped 0.4% in January. Spending on nonresidential structures has contracted for eight consecutive quarters despite ‌a surge in the construction of data centers to support artificial intelligence.

Investment in public ⁠construction projects increased 0.6% after dipping ‌0.1% in December. State ​and local government construction spending rose 0.6% in January, and outlays on federal government projects increased 1.0%.

(Reporting by Lucia Mutikani; Editing by ‌Paul Simao)

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