U.S. Construction Spending Unexpectedly Pulls Back Sharply In September

(RTTNews) - Construction spending in the U.S. unexpectedly pulled back sharply in the month of September, according to a report released by the Commerce Department on Monday.

The report said construction spending tumbled by 1.9 percent to an annual rate of $2.186 trillion in September after surging by 2.0 percent to a revised rate of $2.227 trillion in August.

Economists had expected construction spending to climb by 0.4 percent compared to the 0.9 percent increase originally reported for the previous month.

"Construction spending notched a strong decline in September, though upward revisions to the prior months explained some of the weakness and imply a stronger contribution to Q3 GDP," said Matthew Martin, Senior U.S. Economist at Oxford Economics.

The unexpected slump in construction spending came amid a steep drop in spending on private construction, which plunged by 2.4 percent to an annual rate of $1.639 trillion.

Spending on residential construction plummeted by 5.5 percent to an annual rate of $848.8 billion, more than offsetting a 1.1 percent jump in spending on non-residential construction to an annual rate of $790.6 billion.

"Residential and nonresidential construction spending are set to diverge in the months ahead," said Martin. "The residential market will face elevated mortgage rates, while a jobless expansion crimps demand for multifamily housing, and higher materials costs challenge demand for home renovations."

"Data center construction remains at the heart of the nonresidential buildout and is on track to double its pace of spending from December 2025 by year end," he added. "Related spillovers into power structures spending are mounting."

Meanwhile, the Commerce Department said spending on public construction edged down by 0.1 percent to an annual rate of $546.8 billion.

Spending on highway construction fell by 0.3 percent to an annual rate of $149.2 billion, while spending on educational construction was virtually unchanged at an annual rate of $113.1 billion.