US construction spending drops to nearly three-year low in July

US construction spending drops to nearly three-year low in July Workers carry out construction work in Lower Manhattan, New York City, U. S. , July 15, 2026.

REUTERS/Eduardo Munoz · Reuters Reuters Tue, September 1, 2026 at 5:15 PM GMT+2 2 min read WASHINGTON, Sept 1 (Reuters) - U. S. construction spending unexpectedly fell in July, hitting the lowest level in nearly three years as higher mortgage ‌rates weighed on single-family homebuilding.

The Commerce Department's Census Bureau said on Tuesday ‌that construction spending dropped 0. 5% to $2. 158 trillion, the lowest level since October 2023.

Data for June ​was revised higher to show construction spending unchanged instead of dipping 0. 1%, as previously reported. Economists polled by Reuters had forecast construction spending would be unchanged in July.

Construction spending plunged 3. 8% on a year-over-year basis in July. Spending on private ‌construction projects decreased 0.

5% after ⁠easing 0. 1% in June. Investment in residential construction tumbled 1.

3%. Spending on single-family housing projects dropped 3. 2%.

On a year-over-year ⁠basis, it plummeted 6. 5% in July. Homebuilding is also being squeezed by a glut of unsold single-family houses.

The average rate on the popular 30-year fixed-rate mortgage is hovering ​near ​a one-year high of 6. 66%, data from ​mortgage finance agency Freddie Mac showed. ‌It has surged by almost 70 basis points since the U.

S. -Israeli war with Iran started in late February. Spending on multi-family housing units, which account for a small share of the housing market, rose 0.

2% in July. Investment in private nonresidential structures such as power plants and factories increased 0. 4% in July.

Spending on ‌power plants rose 0. 5%. But outlays on ​factory projects dropped 0.

8% in July and 21. 7% ​on a year-over-year basis as ​the boost from the 2022 CHIPS and Science Act fades. ‌That fading momentum has more than offset ​some of the ​lift from an artificial intelligence buildout.

Investment in nonresidential structures contracted in the second quarter, logging its 10th straight quarterly decline. Investment in public construction ​projects fell 0. 2% in ‌July after gaining 0.

1% in June. State and local government construction ​spending was unchanged, while outlays on federal government projects declined 3. 5%.