US Construction Spending Drops 1.9% in September

US construction spending fell 1.9% in September, according to data released Monday by the Commerce Department’s Census Bureau.

The drop nearly erased the 2.0% increase recorded in August, which had been revised upward. Economists surveyed by Reuters had expected spending to rise by 0.3% in September. On a year-over-year basis, total construction spending declined by 2.7%.

Private construction projects saw a 2.4% decrease in September, following a 2.6% gain the previous month. Residential investment slumped 5.5%, a trend attributed to weakness in renovation projects. While outlays on single-family housing remained flat month over month, they fell 2.4% compared to the same period last year. Multifamily housing spending, a small segment of the market, rose by 0.1%.

The contraction in residential investment coincides with rising borrowing costs. The average rate on a 30-year fixed mortgage has increased by at least 125 basis points since the US-Israeli war with Iran began in late February, according to Freddie Mac data.

In the nonresidential sector, private investment rose 1.1% in September. Spending on power plants advanced 1.2%. Public construction investment dipped 0.1% after a 0.2% gain in August. State and local government projects saw spending fall by 0.3%, while federal government project outlays jumped 2.5%.

The Census Bureau reported these figures in its monthly survey of construction put in place. The data reflects changes in the value of new construction work across private and public sectors.