Construction Spending Increased in April For Second Straight Month

Construction spending rose 1.2% in April, increasing for the second month in a row, though high mortgage rates are weighing down on construction of single-family homes which, ideally, should be in demand amid a lack of housing inventory.

Spending on private and public construction in April amounted to an estimated $1.91 billion, up from the revised March estimate of $1,89 billion. Spending in April was up 7.2% from the same time last year, according to the U.S. Department of Commerce. 

During the first four months of 2023, construction spending was 6.1% higher than it was over the same period in 2022. 

Residential Construction Picked Up in April, Boosted By Multifamily Homes

The average 30-year fixed-rate mortgage reached 6.91% last week, the highest it's been since November. As rates climb again, would-be homebuyers and sellers are feeling locked in by the low interest rates they signed onto with their current homes. As a result, market inventory is shrinking, causing high competition and a lowered availability of homes. 

New residential construction could help fill that gap. But high mortgage rates could be depressing new building as well. New, private single family construction spending had a drop of 0.8% in April, and was down 24.7% year-over-year. 

As high home prices, mortgage rates and inventory shortages have dampened the single-family housing market, multifamily housing and construction has stepped in to fill some of the void. New private multifamily construction spending rose 0.6% over the month and was up 24.9% from April of last year. 

Private residential construction for both single family and multifamily grew 0.5% throughout the month, but was still down 9.2% year-over-year. 

Private Lodging, Manufacturing Spending Increases

Among private, nonresidential construction, spending increased 2.4% for the sector, and was 31.2% higher than April of 2022. 

Most industries saw modest increases in spending. Spending on private lodging saw a 2.7% increase in April, and was up 41.6% from April of last year. Spending on manufacturing construction also jumped 8.7% throughout the month, and was up 104.6% from the year prior. Private commercial construction also saw a 0.7% increase in spending, and was up 23.4% year-over-year. 

Total Public Construction Spending Jumps 1.1%

Total public construction spending increased 1.1% throughout the month, with $407.6 billion spent in April. 

Private residential construction dropped 1.0% in April, but was still up 7.9% from one year ago. 

Office construction grew 4.3% over the month, and was up 10.7% year-over-year. Private health care construction was up 3.5% in the month, and grew 15.3% since April of last year.