Construction spending in the United States surprisingly increased in November, boosted by advances in nonresidential constructions, although single-family homebuilding remained hampered by higher mortgage rates.
According to the Commerce Department, construction spending increased 0.2% in November after dipping 0.2% in October.
Reuters polled economists, who predicted a 0.4% drop in construction spending. In November, construction spending grew 8.5% year over year.
Private construction spending increased 0.3% in November after falling 0.7% in October.
Private non-residential investment, such as gas and oil well drilling, increased by 1.7%.
However, residential construction investment declined 0.5%, with single-family home spending down 2.9%. Outlays on multi-family housing developments grew 2.4%, owing to high rental housing demand.
The Federal Reserve’s struggle to control inflation, with the sharpest rate hike cycle since the 1980s, is suffocating the housing market, with homebuilding and sales falling.
The average 30-year fixed mortgage rate, which surpassed 7% for the first time since 2002 in October, has resumed its rising path after briefly declining in late 2022, according to statistics from home financing firm Freddie Mac.
Last week, the rate averaged 6.42%, up from 6.27% the previous week. During the same time in 2021, it averaged 3.11%.
Residential investment has fallen for six consecutive quarters, the longest since the 2006 housing market crash.
Spending on public building projects fell 0.1% in November after rising 1.6% in October. State and local government building investment fell by 0.7%, while federal government construction spending increased by 7.2%.