Construction Spending at 10-Month High

Construction spending jumped 1.5% in November, rebounding from a 0.1% decrease in October and reaching a 10-month high, the government said today.

The Commerce Department said residential, non-residential and government construction spending totaled a seasonally adjusted annual rate of $421.7 billion in November. It was the highest level of spending since last January’s $423-billion rate.

Total spending in October was revised downward from the 1% increase reported initially.

The November surge was due to a 7% jump in government spending, which represents about 20% of construction spending, combined with a 0.6% gain in residential construction, which accounts for about 50% of the total. Non-residential spending was off 0.7%.

Construction spending fell to a yearly low rate of $410.3 billion last July. It has been among the sectors of the economy hardest hit by higher interest rates earlier this year, brought about by the Federal Reserve Board’s efforts to restrain inflation by tightening credit.

But as inflation moderated, the Fed began last June to let short-term rates drop and analysts have been saying the lower rates should result in increased construction.

Fixed-rate mortgages declined from a peak of 11.22% last March to 9.74% at the end of November, according to a weekly survey by the Federal Home Loan Mortgage Corp.