WASHINGTON (Reuters) – U.S. construction spending rose less than expected in November amid a decline in outlays on public projects, but data for the prior month was revised sharply higher suggesting underlying strength in the sector.
The Commerce Department said on Tuesday that construction spending increased 0.4%. Data for October was revised up to show construction spending surging 1.2% instead of gaining 0.6% as previously reported. Economists polled by Reuters had forecast construction spending rising 0.6%.
Construction spending shot up 11.3% on a year-on-year basis in November. Despite coming below expectations, the report added to a recent raft of data on the labor market, consumer spending and confidence in suggesting that the economy regained momentum after appearing to falter at the start of the fourth quarter.
Spending on private construction projects increased 0.7% in November after rising 1.2% in October. Investment in residential construction advanced 1.1% after rising 2.0% in the prior month.
Outlays on new single-family construction projects jumped 2.9%. An acute shortage of previously owned homes on the market is boosting new construction. With the rate on the popular 30-year fixed mortgage falling further below 7%, single-family homebuilding could surge in 2024. Strong activity in this housing market segment helped to end nine straight quarters of decline in residential investment in the third quarter.
Outlays on multi-family housing projects edged up 0.1% in November. Momentum is fading amid a large stock of multi-family housing under construction. The rental vacancy rate also jumped to its highest level in 2-1/2 years in the third quarter.
Outlays on private non-residential structures like factories rose 0.2% in November. Spending on manufacturing construction projects increased 0.5%, still supported by the Biden administration efforts to bring semiconductor manufacturing back to the United States.
Spending on public construction projects fell 0.7% after increasing 1.3% in October. State and local government spending declined 0.5% while outlays on federal government projects tumbled 3.1%.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
