WASHINGTON – National construction activity took an unexpected downturn in January, with spending declining across private sector projects, according to new federal data released Monday.
The Census Bureau within the Commerce Department reported construction spending slipped 0.3% during the month, following a revised 0.8% surge in December that marked the strongest growth since April 2024.
The January decline caught analysts off guard, as economists surveyed by Reuters had predicted a modest 0.1% increase. Despite the monthly drop, construction spending still managed a 1.0% gain compared to January of the previous year.
Data releases from the Census Bureau continue to face delays stemming from last year’s federal government shutdown, officials noted.
Private sector construction activity bore the brunt of January’s decline, falling 0.6% after posting a 1.0% gain in December. Home construction investment dropped 0.8% following a robust 2.5% December increase that was partially driven by renovation activity. New single-family home projects saw spending decrease 0.2% as elevated mortgage rates continue hampering the market.
While mortgage rates had softened early in the year, they’ve climbed since the U.S.-Israeli conflict with Iran began in late February. The Middle Eastern tensions have pushed up oil prices and Treasury yields as inflation concerns mount.
Freddie Mac data reveals the benchmark 30-year fixed mortgage rate has risen to 6.22% from 5.98% just before the war began. These mortgage rates move in tandem with 10-year Treasury yields. The rate increases compound existing challenges from higher material and labor costs, which have climbed due to import tariffs and tighter immigration policies.
Home construction investment has now fallen for four consecutive quarters. Multi-family housing projects, representing a smaller portion of the overall market, declined 0.7% in January.
Commercial construction spending, including office buildings and manufacturing facilities, dropped 0.4% during the month. This sector has now contracted for eight straight quarters, even as data center construction has surged to meet artificial intelligence demands.
Public construction projects provided the month’s bright spot, with spending rising 0.6% after a slight 0.1% December decline. State and local government construction expenditures increased 0.6% in January, while federal construction projects grew 1.0%.
