US construction spending rises less than expected in November

US 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 per cent. Data for October was revised up to show construction spending surging 1.2 per cent instead of gaining 0.6 per cent as previously reported. Economists polled by Reuters had forecast construction spending rising 0.6 per cent.

Construction spending shot up 11.3 per cent 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 per cent in November after rising 1.2 per cent in October. Investment in residential construction advanced 1.1 per cent after rising 2.0 per cent in the prior month.

Outlays on new single-family construction projects jumped 2.9 per cent. 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 per cent, 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 per cent 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 per cent in November. Spending on manufacturing construction projects increased 0.5 per cent, still supported by the Biden administration efforts to bring semiconductor manufacturing back to the United States.

Spending on public construction projects fell 0.7 per cent after increasing 1.3 per cent in October. State and local government spending declined 0.5 per cent while outlays on federal government projects tumbled 3.1 per cent.