US construction spending rises to a record high in November

WASHINGTON (Reuters) – US construction spending rose to a record high in November, boosted by a robust housing market amid historic low mortgage rates, which could help ease some of the economy’s blows from furious infections. COVID-19.

The Commerce Department said Monday that construction spending rose 0.9 percent to $ 1.459 billion, the highest level since the government began tracking the series in 2002. Data for October have been revised higher to show construction spending accelerating by 1.6% instead of 1.3%, as previously reported.

Strong construction spending supports economists’ forecasts that the economy grew at an annualized rate of about 5% in the fourth quarter. The sharp drop from a record 33.4% in the third quarter reflects a resurgence of coronavirus cases, which hit the services sector.

Growth is also slowing after more than $ 3 trillion in government emergency aid and delays in approving another rescue package. Nearly $ 900 billion in tax incentives were approved at the end of December.

Construction costs account for about 5% of gross domestic product.

“The data suggests a modest growth risk for our fourth-quarter GDP growth forecast for the fourth quarter,” said Mike Englund, chief economist at Action Economics in Boulder, Colorado. “The real estate boom is raising construction activity in general … despite stagnant housing data related to transactions in recent months.”

Economists surveyed by Reuters estimated that construction spending will increase by 1.0% in November. Construction expenses increased by 3.8% compared to the previous year in November.

Expenditures for private construction projects increased by 1.2%, fueled by investments in the construction of single-family homes, amid low mortgage rates and pandemic migration to suburbs and low-density areas. This followed an advance of 1.6% in October.

Expenditures for residential projects increased by 2.7%, after increasing by 3.2% in October.

But spending on non-residential construction, such as drilling for gas and oil wells, fell 0.8% in November. The pandemic lowered prices, leading to a contraction in spending on non-residential structures in the third quarter. The fourth consecutive quarterly decline in investment in non-residential structures saw a return to global business investment.

Expenditure on public construction projects fell by 0.2% in November, after rising by 1.6% in October. State and local government spending rose 0.1%, while federal government spending fell 4.2%.

“Non-residential and public construction remains moderate due to weak demand due to disruptions caused by the virus limitation as well as budgetary constraints,” said Rubeela Farooqi, chief economist at High Frequency Economics in White Plains, New York.