The US manufacturing sector also continued to decline in April as high tariffs and borrowing costs put more pressure on factory output and builders.
Data point to growing concern about the US economy, amid inflationary pressures that persist and ongoing trade tensions.
The US Census Bureau of the Commerce Department reports that construction expenditures fell 0.5% from 0.6% in February to 0.5% (revised estimate, previously estimated at 0.7%).
The markets were surprised by the decline, as economists expected only a 0.2% increase.
U.S. Construction spending in the U.S. fell slightly in March. Total: $2.20T, (down 0.5% MoM). #Private $1.69T. (down 0.6% MoM.) #Residential $937.7B. (down 0.4%). #Nonresidential $750.3B. (down 0.8%). #Public $508.1B. (down 0.2%). Still 2.8% YoY.
Construction spending is still 2.8% higher on an annual basis compared with March 2023.
The private construction sector, which is responsible for most of the overall expenditure, has seen a decline of 0.6%.
Residential construction fell by 0.4% within the sector. However, spending on single-family new homes increased by 0.1%.
The investment in housing for multi-family units remained the same during this month.
The housing market continues to be impacted by high mortgage rates, increased costs of materials, and tariffs.
According to the National Association of Homebuilders, new tariffs — including a 145% tax on Chinese products and a 25 percent tax on steel and aluminum imported from abroad — have increased construction costs by about $10,900 for each home.
The private non-residential sector, including commercial construction projects such as offices and factories fell 0.8%. This suggests a general caution on the part of developers and business.
The overall expenditure on public construction also decreased by 0.2%.
Federal construction expenditures were down by 0.4% while state and local government spending dropped 0.2%. This indicates a small pullback of government-funded infrastructure.
US Manufacturing Struggles in April
According to the Institute for Supply Management, its Manufacturing Purchasing Managers’ Index fell from 49.0 at the end of March to 48.7 in April. This is the lowest reading in 5 months.
A reading of less than 50 signifies contraction. Manufacturing accounts for about 10% of the U.S. GDP.
This downturn was a result of the “Liberation Day”, an announcement made by former president Donald Trump, who imposed tariffs on all imports, especially Chinese products, further stressing fragile supply chains.
The manufacturers who are heavily dependent on raw materials imported face higher costs of input and longer lead times.
US manufacturing stagnated in April. PMI remained at 50.2, exports dropped, and output was down. Prices rise, and confidence falls to a 10-month low. To protect their margins, firms raise prices and cut staff. The outlook is clouded by inflation & trade risk. #PMI #Manufacturing
ISM’s sub-index for new orders, which is a forward-looking indicator, improved slightly to 47.4 from 45.2, offering some hope.
The production level remained low, but the index of supplier deliveries jumped from 53.5 to 552, signalling a slower pace of delivery.
The prices paid to manufacturers increased by 69.8 percent, the highest level since June 20, 2022. This suggests renewed pressure on inflation.
The factory employment rate remained low, as the ISM employment indicator rose slightly from 44.7 to 46.5, still in contraction territory. The manufacturing industry’s imports also fell for the first since December due to reduced demand and disruptions in trade.
The weak data in construction and manufacturing point towards a slowing of the economy as rising tariffs, material prices, and tighter monetary policies continue to affect investment and production.
The post US Construction Spending Slips in March and Manufacturing Slump Deepens in April Amid Tariff Headwinds could be updated as new developments unfold.
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