WASHINGTON, April 1 – U.S. construction spending rose more than anticipated in February, driven by a rebound in single-family homebuilding as mortgage rates declined. However, concerns about economic uncertainty persist due to ongoing tariff pressures that could weigh on future growth.

The Commerce Department's Census Bureau reported on Tuesday that construction spending surged 0.7% for the month, following a downwardly revised 0.5% decline in January. Analysts surveyed by Reuters had projected a 0.3% rebound, after a previously estimated 0.2% drop in January.

Construction spending increased 2.9% year-over-year in February. Private construction investments saw a 0.9% rise, with residential construction leading the way with a 1.3% surge. Single-family home projects saw a notable 1.0% increase as homebuyers took advantage of easing borrowing costs.

Mortgage rates, which spiked earlier in the year, have since moderated, providing relief to potential homeowners and boosting demand for new housing. However, tariffs on imported materials continue to create challenges for builders.

President Donald Trump has initiated a new trade probe that may lead to additional tariffs on imported lumber, compounding the existing taxes on Canadian softwood lumber, a critical material in construction, furniture, and paper industries.

Trump has also increased tariffs on Chinese goods to 20% and imposed duties on steel and aluminum imports. The National Association of Homebuilders noted that "builders estimate a typical cost effect from recent tariff actions at $9,200 per home."

Investment in multi-family housing projects remained flat in February, while private non-residential construction, including offices and factories, climbed 0.4%.

Spending on public construction projects edged up 0.2%, with state and local government investments rising 0.4%. In contrast, federal government construction expenditures fell 1.6%.

Despite the positive momentum in February, economists caution that uncertainties surrounding trade policies and potential new tariffs could slow further expansion in the construction sector. Industry leaders continue to monitor policy developments closely, weighing their potential impact on materials costs and overall project viability.

With interest rates showing signs of stability and demand for housing remaining strong, construction activity is expected to maintain its upward trend, though the specter of trade tensions looms over the long-term outlook.

Originally reported by Reuters.