Construction Spending Declines in November

Homeowners cut back on improvements and government dropped the ax on big building projects in November, driving nationwide construction spending down for the first time in four months.

The Commerce Department reported Wednesday that total construction spending fell by 0.6% to a seasonally adjusted annual rate of $815.6 billion.

Economists said that bad weather, stock market volatility, lower consumer confidence and higher energy prices all played roles in the November decline.

“It’s another sign the economy is slowing down--potentially too rapidly,” said Carl Tannenbaum, chief economist for LaSalle Bank/ABN AMRO in Chicago.

Many economists were expecting construction spending in November to be flat. The decline was the first since the 0.7% of last July.

After rising 2.1% in October, spending on residential construction projects declined by 1.5% to an annual rate of $353.8 billion. That reflected a drop of 6.3% in spending on home improvements.

“Additions and improvements account for 28% of total residential construction spending, are large enough to impact the total when they jump around that much and could be viewed as a good gauge of consumer confidence,” said David Orr, chief economist for First Union.

Spending on new single-family homes rose by 0.3% to a rate of $226.2 billion in November, helped out by cheaper mortgage rates. Spending on apartments and condos went up by 2.9% to a rate of $28.7 billion.

Since hitting a five-year high in May, rates on 30-year fixed-rate mortgages have been falling. They hit a 19-month low of 7.13% last week.

The report also showed spending by the government on big projects fell by 2.1% to a seasonally adjusted rate of $183.4 billion. The government spent less on building houses and highways but more on military projects in November. In October, spending for public works declined by 0.5%.

Spending by private businesses on nonresidential projects, such as office buildings and motels, rose by 1.2% in November to a rate of $227.5 billion, following a 0.9% increase the month before.

In October, all construction spending rose by 0.8% to $820.2 billion, according to revised figures. That was slightly weaker than the government previously reported.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Construction Spending

Here is a look at monthly construction spending.

Seasonally adjusted

Cahange from previous month

Nov..: -0.5%

Oct. +0.8%

Sept.: +1.5%

*

Source: Department of Commerce