Construction spending rises in November; still well below healthy levels

Construction spending rose in November for the third time in four months, which likely provided a boost to economic growth in the final quarter of the year. 

Spending on construction, including of multifamily housing and single-family homes, jumped 1.2 percent in November after a downwardly revised 0.2 percent drop in October, the largest increase since a 2.2 percent rise in August, the Commerce Department said Tuesday.

November spending rose to a seasonally adjusted annual rate of $807.1 billion, higher than the October estimate of $797.4 billion and 0.5 percent higher than November 2010’s $803 billion, but still much less than the $1.5 trillion economists say reflects a healthy sector.

Still, construction spending through the first 11 months of last year was 2.5 percent less than in the same period of 2010.

The crash of the housing sector sent construction spending tumbling, and it could still take years for it to recover to healthy levels, economists estimate. 

Residential construction and government spending helped provide the boost in November while business construction was flat. 

Spending on private construction was at a seasonally adjusted annual rate of $522.3 billion, 1 percent higher than the revised October estimate of $517.3 billion, and the highest amount in nearly two years. 

Residential construction hit $243.7 billion, 2 percent higher than the revised October estimate of $238.9 billion, as many builders focus on building multifamily homes as renting increases. 

Builders in November broke ground on homes at a seasonally adjusted annual rate of 685,000, a 9.3 percent increase from October and the fastest pace since April 2010.

The National Association of Home Builders recently reported that its housing index was up for the third straight month and had reached its highest point since May 2010, even as 2011 home sales are likely to finish up worse than record-low levels from the previous year. 

A high level of unemployment, along with a glut of foreclosed homes on the market, has made a recovery difficult. 

Still, housing has shown signs of life, with builders breaking ground on more homes in November than at any time in the past 19 months while construction permits climbed to a one-year high, the Commerce Department showed last month.

Meanwhile, nonresidential construction was at a seasonally adjusted annual rate of $278.6 billion in November, nearly the same as in October.

Public spending was up 1.7 percent to $284.9 billion, with educational and highway construction reflecting increases. 

Educational construction was 0.5 percent higher than October levels, while spending on highways was up 1.9 percent.