Construction Spending in U.S. Rises More Than Forecast

(Corrects executive’s title in final paragraph.)

Construction spending in the U.S. rose in November for a third time in four months, indicating the industry helped boost growth at the end of 2011.

Building outlays increased (CNSTTMOM) 1.2 percent, exceeding the median estimate of 46 economists in a Bloomberg survey that called for a 0.5 percent gain, Commerce Department figures showed today in Washington. The October reading was revised down to show a 0.2 percent drop from a previously projected 0.8 percent increase, showing the initial data are susceptible to swings in direction.

Recent gains in the housing market, spurred in part by mortgage rates near record lows, are helping the construction industry recover from the 18-month recession that ended in June 2009. Public expenditures also climbed during the month, a sign that budget constraints may be easing.

“Residential construction and even business construction have been favorable,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “I expect that to continue.”

Estimates in the Bloomberg survey ranged from a drop of 0.6 percent to an increase of 1.4 percent.

Private construction spending climbed 1 percent in November from the prior month to $522 billion, the highest level since December 2009. Homebuilding outlays increased 2 percent, including a 2.6 percent gain in home improvement. Expenditures on single-family and multifamily housing also improved.

Public Building

Spending on public construction climbed 1.7 percent, today’s report said. Federal construction outlays increased 5.3 percent, the biggest gain since August, to $27.6 billion. Outlays by state and local agencies rose to the highest level since January 2011.

In November, builders broke ground on more homes than at any time in the previous 19 months and construction permits climbed to a one-year high, suggesting housing may not be a drag on gross domestic product next year, data from the Commerce Department showed last month.

Housing starts were at a 685,000 annual rate that month, Commerce Department figures showed Dec. 20. Building permits, a proxy for future construction, increased 5.7 percent.

Homebuilder sentiment has improved as well. The National Association of Home Builders/Wells Fargo sentiment index rose in December for a third consecutive month, to the highest level since May 2010. Readings less than 50 mean more respondents said conditions were poor.

Some companies say improvements are needed in commercial real estate.

“To get any better we need some help from commercial construction,” John Lundgren, chief executive officer at toolmaker Stanley Black & Decker Inc. (SWK), said on a Dec. 7 conference call with analysts. Overall, he said, “it’s not going to get any worse from a macro perspective.”

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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