US Construction Spending Plunges to Three‑Year Low, Signaling Economic Slowdown

U.S. construction spending fell 1.5 % in the second quarter of 2023 to $2.5 trillion, reaching a three‑year low.

Housing Market Slowdown

■New home applications dropped 12 %, while home prices slowed by 3 %.

■Mortgage rates remained at 5.25 %, with credit scores declining.

■Construction permits fell 7 %, with major cities bearing the brunt.

Infrastructure Investment Decline

■Government‑backed projects decreased by $120 million.

■Urban transit and energy infrastructure spending fell 4 %.

■Inflationary pressures raised material costs by 8 %.

Interest Rates and Financial Markets

■The Federal Reserve’s policy rate stayed at 5.25 %, while short‑term bond yields slipped 0.2 %.

■Credit card debt rose 3.5 %, and commercial loan growth slowed 0.8 %.

■Investors plan to cut dividend payouts by 1.2 % amid lower growth expectations.

SME Credit Tightening

■Small‑business loan applications fell 6 %.

■The burden of debt rose with a 4 % increase in interest loads.

■Risk premiums on SME loans climbed 1.7 %.

Regional Variations

■East Coast housing projects fell 3 %, while the West Coast dipped 1 %.

■Mid‑west agricultural infrastructure spending rose 2 %.

■Southern region infrastructure projects declined 5 %.

Kerem Tufan: The contraction in U.S. construction spending reflects a slowdown in the housing market under a high‑interest environment. The tightening of SME credit may strain corporate finances and dampen growth. In the short term, this could prompt the Fed to reassess its rate stance and ease credit conditions, but liquidity will likely remain tight for now.