U.S. construction spending rebounded in March, driven largely by increased investment in single-family housing projects, according to new data released by the Commerce Department’s Census Bureau.
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Construction spending rose 0.6% in March after declining 0.2% in February, outperforming economists’ expectations for a 0.2% monthly increase.
On a year-over-year basis, overall construction spending increased 1.6% in March.
The latest figures suggest continued resilience in parts of the residential construction market despite ongoing pressure from elevated mortgage rates, inflation concerns and higher material costs tied to tariffs.
Private construction spending increased 0.8% during the month after slipping 0.2% in February.
Residential construction spending climbed 1.7% in March following a slight decline the previous month, with spending on new single-family housing projects surging 2.7%, according to the report.
However, economists and industry observers continue monitoring affordability pressures impacting the housing market.
Reuters reported that elevated mortgage rates remain a concern as geopolitical tensions and inflationary pressures continue influencing borrowing costs.
“The U.S.-Israel war with Iran is fanning inflation, keeping mortgage rates elevated,” Reuters noted in its report. Builders are also facing higher prices resulting from tariffs.
Residential investment has now declined for five consecutive quarters overall, highlighting the uneven nature of the housing recovery despite stronger single-family activity.
Meanwhile, spending on multifamily housing units — which represent a smaller portion of the market — rose 0.3% in March.
While residential construction showed improvement, nonresidential construction activity continued to face challenges.
Spending on private nonresidential structures such as office buildings and factories fell 0.2% in March. According to Reuters, nonresidential structure spending has now contracted for nine straight quarters, marking the longest decline on record.
The downturn persists despite continued growth in data center construction tied to artificial intelligence infrastructure demand.
Public construction spending also softened during the month.
Investment in public construction projects declined 0.2% after falling 0.3% in February. State and local government construction spending dipped 0.1%, while federal government construction outlays dropped 2.6%.
The Census Bureau recently resumed normal reporting schedules for construction spending data after delays tied to last year’s federal government shutdown.
Economists continue watching construction activity closely as the sector remains sensitive to interest rate policy, financing costs, labor availability and broader economic conditions.
The construction industry has experienced mixed conditions in recent months, with housing demand stabilizing in some regions while commercial and institutional development activity remains uneven.
Originally reported by Kitco.
