Construction spending in the U.S. increased more than expected in April, boosted by a jump in AI-related sectors and a surge in single-family home construction.
The Commerce Department’s Census Bureau reported on Monday that construction spending rose 0.4 percent in March, twice as much as expected. The previous month’s initial estimate of a 0.6 percent gain was revised down to 0.2 percent.
Private sector spending for the construction of single-family homes rose 1.4 percent, the second consecutive month of rising spending. Compared with a year ago, however, spending is down 2.9 percent. Rising mortgage rates amid the war with Iran are weighing on residential real estate. So far this year, spending has come in 5.6 percentage points below last year’s pace.
Private sector spending on office construction—the category that includes AI data centers—rose by one percent and is up 7.5 percent from a year ago. In the first four months of the year, office construction spending was 8.3 percent above last year’s level. Data center construction spending, in particular, is up more than 26 percent from a year ago.
Spending on power facilities—which include electrical generation as well as storage and distribution of crude oil—rose 0.6 percent in April. Compared with April of last year, this category is up six percent. Year to date it is up 5.6 percent.
Those two categories—power and office—accounted for about one-third of the total private sector spending increase.
The biggest drag on spending in May was manufacturing, where construction spending fell 1.2 percent. It is down 18.5 percent from a year ago and off 17.9 percent year to date. Manufacturing construction spending has been normalizing after surging in the post-pandemic period thanks to inflation and abundant subsidies from the CHIPS Act and the Biden administration’s green energy push. Spending on manufacturing construction, however, is still more double the pre-pandemic levels.
Government spending rose 0.4 percent in the month, boosted by increases in spending on streets and highways, public safety facilities, and educational buildings.
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