US commercial construction drives gains in November

Robert Besser
07 Jan 2023, 20:25 GMT+10

Driven by gains in commercial building, construction spending in the US unexpectedly recovered in November, but high mortgage rates continued to stifle single-family homebuilding
This week, the Commerce Department said that after falling 0.2 percent in October, construction spending rose 0.2 percent in November
The efforts of the Federal Reserve to curb inflation by hiking interest rates at the fastest pace since the 1980s is negatively affecting the housing market, causing a collapse in homebuilding and sales

WASHINGTON D.C.: Driven by gains in commercial building, construction spending in the US unexpectedly recovered in November, but high mortgage rates continued to stifle single-family homebuilding.

This week, the Commerce Department said that after falling 0.2 percent in October, construction spending rose 0.2 percent in November.

According to a Reuters forecast, construction spending will decrease 0.4 percent, compared to a year-on-year increase of 8.5 percent in November, while spending on private construction projects rose 0.3 percent, after dropping 0.7 percent in October.

Residential construction outlays fell 0.5 percent, with spending on single-family housing projects declining 2.9 percent. However, due to strong demand for rental housing, multi-family housing project outlays increased 2.4 percent.

The efforts of the Federal Reserve to curb inflation by hiking interest rates at the fastest pace since the 1980s is negatively affecting the housing market, causing a collapse in homebuilding and sales.

Data from mortgage finance agency Freddie Mac showed that after hitting 7 percent in October for the first time since 2002, the average 30-year fixed mortgage rate continued to rise, after briefly declining in late 2022.

Last week, the rate averaged 6.42 percent, up from 6.27 percent in the previous week and averaging 3.11 percent during the same period in 2021.

In the longest such stretch since the 2006 housing market collapse, residential investment has contracted for six consecutive quarters.