WASHINGTON: US construction spending rose to a record high in November, boosted by a robust housing market amid historically low mortgage rates, which could help blunt some of the hit on the economy from raging Covid-19 infections.
The Commerce Department said on Monday that construction spending increased 0.9% to $1.459 trillion, the highest level since the government started tracking the series in 2002. Data for October was revised higher to show construction outlays accelerating 1.6% instead of 1.3% as previously reported.
Strong construction spending supports economists' predictions that the economy grew at around a 5% annualized rate in the fourth quarter. The sharp step-down from a record 33.4% pace in the third quarter reflects a resurgence in coronavirus cases, which has slammed the services sector.
Growth is also slowing following the exhaustion of more than $3 trillion dollars in government pandemic relief and delays in approving another rescue package. Nearly $900 billion in fiscal stimulus was approved in late December.
Construction spending accounts for about 5% of gross domestic product. Economists polled by Reuters had forecast construction spending would rise 1.0% in November. Construction spending increased 3.8% on a year-on-year basis in November.
Spending on private construction projects increased 1.2%, fuelled by investment in single-family homebuilding amid record-low mortgage rates and a pandemic-driven migration to suburbs and low-density areas. That followed a 1.6% advance in October.
Spending on residential projects increased 2.7% after surging 3.2% in October. But outlays on nonresidential construction like gas and oil well drilling fell 0.8% in November. The pandemic has depressed prices, leading to a contraction in spending on nonresidential structures in the third quarter. The fourth straight quarterly drop in investment in nonresidential structures bucked a rebound in overall business investment.
Spending on public construction projects eased 0.2% in November after rising 1.6% in October. State and local government outlays edged up 0.1%, while federal government spending dropped 4.2%.
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