Spending on U.S. construction projects climbed more than forecast in December, showing the housing industry is sustaining gains that may lift the economy.
Outlays rose 0.9 percent to a $885 billion annual rate, the highest level since August 2009, after increasing a revised 0.1 percent in November, the Commerce Department reported today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for a 0.7 percent increase.
Improving demand driven by population growth and affordable borrowing costs, coupled with low inventories, is fueling business for homebuilders such as D.R. Horton Inc. Limited access to credit and little progress on reducing unemployment may prevent bigger gains in the real estate recovery.
“When we see volumes pick up, that makes homebuilders feel more comfortable about going out and creating new houses because they feel like the market’s starting to pick up,” Andres Garcia Amaya, a U.S. market strategist at JPMorgan Investment Management in New York, said before the report. “There’s just not enough houses out there for people to buy.”
In another report today, payrolls rose by 157,000 workers last month following a surge at the end of 2012 that was larger than previously estimated, according to the Labor Department. The unemployment rate climbed to 7.9 percent from 7.8 percent in December, according to a separate survey of households.
Estimates in the Bloomberg survey for construction spending ranged from little changed to gains of 1.7 percent. November was initially reported as a 0.3 percent drop.
The larger-than-projected increase combined with the better reading in November may help boost fourth-quarter growth.
The world’s largest economy unexpectedly shrank at a 0.1 percent annual rate from October through December, Commerce Department data showed this week. The figures will be updated at the end of this month and again in March as more information, such as today’s construction report, becomes more available.
Construction spending climbed 9.2 percent for all of 2012, the first annual increase since 2006 and the biggest since 2005, today’s report showed.
Private construction spending advanced 2 percent in December from the prior month.
Homebuilding outlays increased 2.2 percent to a $308.2 billion annual rate, the highest level since November 2008. Private non-residential projects rose 1.8 percent, reflecting gains in schools and power plants.
D.R. Horton, the largest U.S. homebuilder by volume, is among companies seeing a boost in orders. The Fort Worth, Texas-based company reported fiscal first-quarter profit more than doubled from the previous period with net income at $66.3 million, or 20 cents a share, for the three months ended Dec. 31, up from $27.7 million, or 9 cents, a year earlier, according to a Jan. 29 statement.
“This quarter we saw a broad improvement in demand in most of our markets, which has given us the ability to raise prices in more of our communities,” Donald Tomnitz, the company’s president and chief executive officer, said on an earnings call that day. “We’re anticipating a good spring selling season and have added homes and communities to capture this increasing demand.”
Purchases of new homes unexpectedly dropped in December, Commerce Department data showed last week. The 7.3 percent decline to a 369,000 annual pace followed the prior month’s 398,000 rate that was higher than previously estimated. Builders sold 367,000 homes in 2012, the most in three years and the first annual increase in seven.
Spending on public projects dropped 1.4 percent from the prior month, today’s Commerce Department figures showed. Federal construction climbed 1.3 percent after falling 5.2 percent in November. State and local agency projects declined 1.7 percent from the prior month to $245.1 billion at an annual rate, the weakest since November 2006.