Construction spending increases by 0.3 percent in November

WASHINGTON (AP) _ Construction spending rose by 0.3 percent in November, helped by record activity in the red-hot housing market, the government reported Friday. <br><br>The Commerce Department said building

Friday, January 3rd 2003, 12:00 am

By: News On 6

WASHINGTON (AP) _ Construction spending rose by 0.3 percent in November, helped by record activity in the red-hot housing market, the government reported Friday.

The Commerce Department said building activity totaled $843.2 billion at an annual rate in November, up from an annual rate of $840.5 billion in October, a month when activity had jumped by an even stronger 1 percent.

The strong performance was spurred by a 0.9 percent increase in spending on residential construction, which rose to a record $421.1 billion at an annual rate in November.

The Federal Reserve has kept interest rates at the lowest levels in four-decades for more than a year now and this has spurred strong sales of both new and existing homes as well as high demand for other big-ticket items such as cars.

The strength in consumer spending has helped to offset weakness in business investment and has kept the recovery on track, although activity has been proceeding in fits and starts.

The uncertain nature of the rebound from the 2001 recession has prompted the administration to put together another economic stimulus package which President Bush will unveil next Tuesday in a speech to the Economic Club of Chicago.

It is expected to include $300 billion in new tax cuts for individuals and businesses over the next decade but is likely to run into stiff opposition from Democrats in Congress who contend that it is too heavily weighted toward providing tax relief for the wealthy.

The solid construction report followed news on Thursday that a closely followed gauge of activity in the manufacturing sector shot up to 54.7 in December from 49.2 in November.

A reading above 50 indicates that manufacturing is expanding while a reading below that level indicates recession conditions. It was the first reading above 50 since August and gave hope that manufacturing, the hardest hit segment of the economy, may finally be entering a recovery.

The construction report showed that the strength in residential spending came from a big jump of 1.6 percent in spending on single-family homes. Apartment construction rose by a strong but smaller 0.5 percent.

Spending on non-residential construction projects fell by 0.1 percent in November to an annual rate of $158.7 billion. This sector has lagged for most of the year, reflecting a reluctance by businesses to commit to spending on new plants and offices because of the uncertain economic outlook. That uncertainty has increased in recent months over worries about how a possible U.S. invasion of Iraq will affect oil prices and overall economic prospects.

Spending on new factories fell by 1.5 percent in November while spending on office construction was down by 0.5 percent.

Spending on public building projects rose by 1.5 percent to $207.9 billion in November with school construction up by 1.5 percent and highway construction rising by 2.8 percent.