WASHINGTON(Reuters) -U.S. construction spending unexpectedly fell in April, weighed down by a decline in outlays on single-family housing projects amid higher borrowing costs and a rising supply of unsold homes.

The Commerce Department's Census Bureau said on Monday that construction spending dropped 0.4% after a downwardly revised 0.8% decline in March. Economists polled by Reuters had forecast construction spending rebounding 0.3% after a previously reported 0.5% decline in March.

Spending decreased 0.5% year-on-year in April.

Spending on private construction projects slipped 0.7%. Investment in residential construction dropped 0.9%, with outlays on new single-family housing projects declining 1.1%.

Home construction is also being constrained by an unsettled economic outlook amid President Donald Trump's aggressive trade policy, including a recent doubling of steel and aluminum duties to 50% from 25%. New housing inventory is at levels last seen in 2007, while the supply of previously owned homes is the highest in more than four years, leaving builders with limited scope to break ground on new projects.

Outlays on multi-family housing units dipped 0.1% in April. Investment in private non-residential structures like offices and factories eased 0.5%.

But spending on public construction projects increased 0.4%. State and local government spending rose 0.3%, while outlays on federal government projects shot up 2.7%.