Construction spending set another record in November as continued low interest rates powered home building and state and local governments did their part by pushing their activity to all-time highs as well.
The Commerce Department reported that construction rose by 1.2 percent in November from the October pace, to a seasonally adjusted annual rate of $934.5 billion.
It marked the fifth straight month that the annual rate has set a record, reflecting a building boom that has been generated by the lowest interest rates in more than four decades.
Economists are looking for construction activity to remain strong in the coming year because they believe the Federal Reserve will keep a key interest rate it controls at a 45-year low at least until midyear in an effort to ensure that the current economic rebound does not falter.
The November construction report showed widespread strength across a number of categories.
Private construction rose by 1.2 percent to a seasonally adjusted annual rate of $710.8 billion while total public construction also set a record, increased by 1 percent to $223.7 billion.
The strength in the private sector was led by a 2 percent jump in residential construction, which advanced to a new record annual rate of $495.7 billion. Home building and home sales were pushed to record levels in 2003 as the Fed’s campaign to jump-start the economy kept mortgage rates at levels not seen since the late 1950s.
While mortgage rates have been rising slightly in recent months, economists are looking for home sales to be down only slightly in 2004 from the torrid pace of 2003.
The Commerce report showed that office construction posted a solid increase of 2.5 percent in November, rising to an annual rate of $31.1 billion. Commercial building activity, a category that includes shopping centers, posted a gain of 0.6 percent in November to an annual rate of $56.7 billion.
The 1 percent rise in government construction activity reflected a 1.1 percent rise in spending by state and local governments to a record annual rate of $205.7 billion. Spending by the federal government on construction projects came in at an annual rate of $17.95 billion, the strongest pace since last July.