[ad_1]
WASHINGTON (Reuters) – U.S. construction spending rose more than expected in December on the back of a surge in single-family home construction, but is likely to rise further due to lower mortgage rates.
The Commerce Department said Thursday that construction spending rose 0.9%. Data for November has been revised upward, with construction spending increasing by 0.9% instead of 0.4% in the previous report. Economists polled by Reuters had expected construction spending to rise 0.5%.
Construction spending in December increased by 13.9% compared to the same month last year. For the full year of 2023, it increased by 7.0%. Spending on private construction projects rose 0.7% in December after increasing 1.1% in November. Investment in housing construction increased by 1.4%, following a 1.0% increase in the previous month.
Spending on new single-family construction projects increased by 1.6%. Demand for new construction is driven by a persistent shortage of existing homes on the market.
Construction of single-family homes is likely to increase further this year on the back of lower borrowing costs.
The Fed kept interest rates unchanged on Wednesday. Fed Chairman Jerome Powell gave his full support to the strength of the economy, telling reporters that interest rates have peaked and will come down in the coming months.
The US central bank has raised its policy interest rate by 525 basis points since March 2022, to the current range of 5.25% to 5.50%.
Interest rates on popular 30-year fixed-rate mortgages are hovering in the mid-6% range, down from a 23-year high of 7.79% in late October, according to data from mortgage lender Freddie Mac.
Spending on multifamily projects rose 0.3% in December. With rental vacancy rates near a three-year high and a large inventory of planned apartment complexes, room for growth is limited this year.
Spending on private non-residential buildings such as factories fell by 0.2%. Spending on manufacturing construction projects fell 0.1% as the boost from the Biden administration’s policy to bring semiconductor manufacturing back to the United States faded.
Spending on public construction projects rose 1.3%, following a 0.5% increase in November.
State and local government spending increased by 0.9%, and federal project spending increased by 6.4%.
(Reporting by Lucia Muticani; Editing by Andrea Ricci)
[ad_2]
Source link
