WASHINGTON, DC – Spending on U.S. construction projects rose a solid 0.6% in November as gains in home building and government projects offset weakness in nonresidential construction.
It was the fifth consecutive monthly gain and a sharp improvement from a tiny 0.1% October advance, according to a Commerce Department report Friday. The acceleration was led by a 1.9% rise in home construction which was more than double the 0.7% October increase.
Spending on government projects rose 0.9% in November as both activity at the federal level and state and local levels increased.
Spending on private sector nonresidential projects fell 1.2%, the biggest drop since April, reflecting widespread weakness with hotel construction down 3.8% and manufacturing down 2.4%.
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% this week. That was down significantly from a year ago when the 30-year mortgage was at 4.51%
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 U.S.-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% 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.