U.S. construction spending climbed more than expected in October, suggesting that home renovations may have helped lift activity, even as other construction segments continued to struggle.
According to the Commerce Department’s Census Bureau, overall construction spending increased 0.5% in October, reversing a 0.6% decline in September. Economists surveyed by Reuters had projected only a 0.1% gain, while total spending was still down 1.0% compared with a year earlier.
The report was delayed because of the 43-day government shutdown, pushing back the release of the latest construction and investment figures.
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Private construction spending rose 0.6% in October, following a 0.9% drop in September, reflecting a modest bounce in overall private development activity.
Residential construction posted the biggest improvement, with spending jumping 1.3%, after falling 1.4% the month before. However, the increase didn’t appear to be driven by new homebuilding.
Spending on new single-family home construction declined 1.3%, while expenditures on multifamily housing units slipped 0.2%.
With both major housing categories weakening, the rise in residential spending is likely tied to remodeling and repair work rather than new projects breaking ground.
Homebuilding has faced pressure from high borrowing costs, cost inflation, and worker availability issues.
Builders have struggled as mortgage rates remain elevated, even though they have eased slightly in recent weeks.
The housing market also continues to deal with an oversupply of newly built homes, limiting the urgency for developers to launch new projects.
Still, the latest dip in mortgage rates may provide some support. The report pointed to recent conditions improving after the Trump administration began buying mortgage-backed securities.
“But mortgage rates have declined in recent weeks after the Trump administration began purchases of mortgage-backed securities, which could stimulate home purchases and reduce new housing inventory.”
Even so, analysts note that long-term yields could remain a threat to affordability and borrowing costs.
“Rising long-term U.S. bond yields amid renewed trade tensions between Washington and Europe could, however, limit declines.”
Mortgage rates typically move in line with the 10-year U.S. Treasury yield, which has risen recently.
“Mortgage rates track the 10-year U.S. Treasury yield, which has risen after threats by President Donald Trump to slap tariffs on nations that do not support his bid to acquire Greenland.”
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The report added that residential investment has continued to weaken the broader economy.
“Residential investment has been a drag on gross domestic product for three straight quarters.”
Outside housing, conditions were softer. Spending on private nonresidential structures — including offices and factories — fell 0.2% in October.
That segment has now contracted for seven straight quarters, reflecting a prolonged slowdown in commercial development.
However, there may be a partial offset from continued demand for large-scale digital infrastructure.
Construction tied to data centers is still viewed as a potential growth engine, supported by rising capital spending linked to artificial intelligence.
Public construction spending increased slightly, rising 0.1% after climbing 0.4% in September.
Spending by state and local governments increased 0.3%, while federal government construction outlays dropped sharply.
Outlays on federal government projects decreased 2.0% in October, signaling a continued pullback at the national level even as local infrastructure work remains comparatively stable.
Originally reported by Reuters.
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