US construction spending up 0.6pc in November, led by housing

WASHINGTON (AP) — Spending on United States (US) construction projects rose a solid 0.6 per cent last November as gains in home building and government projects offset weakness in non-residential construction.

It was the fifth consecutive monthly gain and a sharp improvement from a tiny 0.1 per cent October advance, according to a Commerce Department report on Friday. The acceleration was led by a 1.9 per cent rise in home construction which was more than double the 0.7 per cent October increase.

Spending on government projects rose 0.9 per cent in November as both activity at the federal level and state and local levels increased.

Spending on private sector non-residential projects fell 1.2 per cent, the biggest drop since April, reflecting widespread weakness with hotel construction down 3.8 per cent and manufacturing down 2.4 per cent.

Lower mortgage rates and a healthy job market have boosted home building. The average national rate for a 30-year fixed-rate mortgage dipped to 3.72 per cent this week. That was down significantly from a year ago when the 30-year mortgage was at 4.51 per cent.

At this time a year ago, the Fed had wrapped up a year when it had boosted interest rates four times.

However, in the face of rising global weakness and headwinds generated by a US-China trade war, the Fed switched from hiking rates to cutting its benchmark rate three times last year, giving a boost to financial markets and interest-sensitive sectors such as housing.

The gain in home building reflected a 1.2 per cent rise in single-family construction which offset an unchanged reading for the smaller apartment sector. The rebound in housing is expected to continue in 2020. Application for new building permits, seen as a good indicator of future activity, jumped in November to the highest level in more than a decade.

The 0.9 per cent increase in government construction reflected a 1.7 per cent rise in spending by the federal government and a 0.8 per cent increase in spending by state and local governments.

Workers erect a building under construction, in Philadelphia on December 3, 2019. PHOTO: AP