US construction spending rebounds in November

US CONSTRUCTION spending unexpectedly rebounded in November, lifted by gains in nonresidential structures, but single-family homebuilding continued to be hammered by higher mortgage rates.

The Commerce Department said on Tuesday (Jan 3) that construction spending climbed 0.2 per cent in November after falling 0.2 per cent in October.

Economists polled by Reuters had forecast construction spending would decrease 0.4 per cent. Construction spending increased 8.5 per cent on a year-on-year basis in November.

Spending on private construction projects advanced 0.3 per cent after declining 0.7 per cent in October.

Investment in private non-residential structures like gas and oil well drilling jumped 1.7 per cent.

But outlays on residential construction fell 0.5 per cent, with spending on single-family housing projects plunging 2.9 per cent. Outlays on multi-family housing projects increased 2.4 per cent, benefiting from strong demand for rental housing.

The Federal Reserve’s battle to tame inflation with the fastest interest rate-hiking cycle since the 1980s is strangling the housing market, with homebuilding and sales collapsing.

The average 30-year fixed mortgage rate, which breached 7 per cent in October for the first time since 2002, has resumed its upward trend after briefly pulling back in late 2022, data from mortgage finance agency Freddie Mac showed.

The rate averaged 6.42 per cent last week, up from 6.27 per cent in the prior week. It averaged 3.11 per cent during the same period in 2021.

Residential investment has contracted for six straight quarters, the longest such stretch since the housing market collapse in 2006.

In November, spending on public construction projects dipped 0.1 per cent after increasing 1.6 per cent in October. Investment in state and local government construction projects declined 0.7 per cent, while federal government construction spending surged 7.2 per cent. REUTERS