WASHINGTON, Aug 3 (Reuters) – U.S. construction spending unexpectedly fell in June as higher mortgage rates continued to weigh on homebuilding.
The Commerce Department’s Census Bureau said on Monday that construction spending dipped 0.1%. Construction spending in May was revised to show it was unchanged instead of edging up 0.1%, as previously reported. Economists polled by Reuters had forecast construction spending would climb 0.2%.
Construction spending dropped 3.2% on a year-over-year basis in June.
Spending on private construction projects eased 0.1% after falling 0.2% in the prior month. Investment in residential construction dropped 0.3%. Spending on new single-family housing projects fell 0.6%. It decreased 3.3% on a year-over-year basis in June.
The average rate on the popular 30-year fixed-rate mortgage has increased by nearly 70 basis points since the U.S. and Israel attacked Iran at the end of February. The rate averaged a one-year high of 6.66% last week, data from mortgage finance agency Freddie Mac showed.
Spending on multi-family housing units, which account for a small share of the housing market, declined 0.7% in June. Residential investment rebounded in the second quarter after contracting for five straight quarters, the government reported last week. Renovations have risen as the higher borrowing costs depress demand for housing.
Investment in private nonresidential structures such as power plants and factories inched up 0.1% in June. Spending on factory projects dropped 1.2%. Investment in nonresidential structures contracted in the second quarter, logging its 10th straight quarterly decline.
Investment in public construction projects was unchanged after increasing 0.6% in May. State and local government construction spending was unchanged in June. Outlays on federal government projects were also flat.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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