Rising Interest Rates Fail to Blunt Construction Spending : Economy: November’s 1.9% gain in private-sector projects offsets 2.7% drop in government expenditures.
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WASHINGTON — Led by the biggest increase in private residential and commercial outlays in eight months, construction spending grew in November for the fourth straight month despite higher interest rates.
The Commerce Department said Wednesday that total spending rose 0.7% to $522.7 billion at a seasonally adjusted annual rate. A 1.9% advance in private outlays offset a 2.7% decline in government expenditures.
It was the largest gain in private spending since a 2.7% advance in March and the biggest drop in public construction since a 6.1% plunge last January.
Spending totaled a revised $518.9 billion in October, when outlays rose 0.9%. The initial October estimate was $518.1 billion.
The latest advance means November expenditures were 6.6% above those of a year earlier.
Some analysts attributed the increase in private outlays to warm weather in much of the nation during November. But they cautioned that higher interest rates are beginning to curb private spending, particularly in the single-family residential sector.
The Federal Home Loan Mortgage Corp. said 30-year, fixed-rate mortgages averaged 9.18% in November, up from 7.15% in February, when the Federal Reserve Board began boosting rates to keep inflation under control. The increase would add more than $200 to the monthly payment on a $150,000 mortgage.
Residential spending rose 0.8% to a $239.3-billion annual rate after falling 0.5% in October. This sector represents nearly half of overall construction outlays.
Single-family outlays edged up 0.1% and reversed a five-month string of decreases. Single-family construction is highly sensitive to mortgage rate changes.
Expenditures for multifamily residences--apartments and condominiums--jumped 5.3%, wiping out a 3.2% decline a month earlier.
Spending on non-residential construction rose 4.8% in November to a $106-billion rate after remaining unchanged a month earlier.
Government outlays dropped 2.7% to a $132.1-billion rate, halting six consecutive increases. Spending on schools fell 6%, and street and highway outlays were down 2.2%.
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Construction Spending
Seasonally adjusted, in billions of dollars:
Nov. 1994: 522.7
Source: Commerce Department
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