US construction spending recovered in October due to renovation work

US construction spending rose more than expected in October, likely due to home renovations, while activity elsewhere was weak.The Commerce Department’s Census Bureau said Wednesday that construction spending rose 0.5% after a 0.6% decline in September. Economists polled by Reuters had forecast construction spending would rise 0.1% in October. Spending fell 1.0% year-on-year in October.

The data was delayed by the 43-day government shutdown. Spending on private construction projects rose 0.6% in October, after falling 0.9% in September.Investments in residential construction increased by 1.3%, after a decline of 1.4% in September. That was despite a 1.3% decline in spending on new single-family homes. Spending on multi-family homes, which make up a small part of the housing market, fell by 0.2%.

Because housing construction for both single-family and multi-family units declined, the increase in housing spending was likely due to renovations. House construction is hampered by higher mortgage interest rates, more expensive building materials due to import duties and a labor shortage.

There is also an oversupply of new homes on the market, which is discouraging builders from undertaking new housing projects. But mortgage rates have fallen in recent weeks after the Trump administration began purchasing mortgage-backed securities, which could boost home buying and reduce the supply of new homes.

However, rising yields on US long-term bonds amid renewed trade tensions between Washington and Europe could limit the decline. The mortgage interest rate follows the 10-year American interest rate. Treasury yields have risen following President Donald Trump’s threats to impose tariffs on countries that do not support his bid to acquire Greenland. Investments in housing have had a negative impact on gross domestic product for three quarters in a row. Investments in private, non-residential buildings such as offices and factories fell by 0.2% in October. Spending on non-residential structures has shrunk for seven quarters in a row, but could get some support from data center construction amid a boom in artificial intelligence spending.

Investments in public construction projects increased by 0.1%, after an increase of 0.4% in September.

State and local government construction spending rose 0.3% in October, while spending on federal government projects fell 2.0%.