U.S. Construction Spending Drops Sharply as Housing Market Struggles

According to the latest data from the U.S. Commerce Department's Census Bureau, construction spending in the United States has continued to decline, dropping 0.4% in June 2025 following a 0.4% decrease the previous month. The primary driver behind this downward trend is a sharp 1.8% plunge in outlays on new single-family housing projects, which industry experts attribute to the combined impact of higher mortgage rates and rising inventory levels.

The housing market's struggles have had a significant ripple effect on the broader construction sector. Government data released earlier this week showed that residential investment contracted in the second quarter of 2025 at its fastest pace since the fourth quarter of 2022. This slowdown in residential construction activity has been a major factor in the overall decline in construction spending.

Analysts point to the Federal Reserve's decision to pause its interest rate-cutting cycle as a key contributor to the challenges facing the housing market. The elevated mortgage rates, coupled with increased economic uncertainty stemming from tariffs on imported goods, have dampened demand for new homes and led to a buildup of inventory.

Despite the gloomy outlook for single-family housing, the construction industry has seen some bright spots, with investment in multi-family housing units remaining unchanged in June and spending on public construction projects edging up 0.1%. However, these gains have been overshadowed by the broader downturn in the sector.