October builder outlays up 0.5%
Growth reported in manufacturing
WASHINGTON — U.S. builders increased spending on construction projects by a modest amount in October, helped by big gains in spending on home construction and the biggest increase in government projects in 10 months.
Construction spending rose 0.5 percent in October after no change in September, the Commerce Department reported Thursday.
Home construction increased 1.6 percent, helping offset a 2.1 percent drop in spending on nonresidential projects. Outlays for construction of offices, hotels and shopping centers all declined. Spending on government projects jumped 2.8 percent, the biggest increase since last December, as federal, state and local spending all rose.
Another economic report Thursday showed manufacturing expanded in November at the fastest pace in five months, indicating American producers are finding more relief in resilient domestic demand.
Financial markets have rallied since the election of Donald Trump, reflecting in part enthusiasm over his vows to increase spending
on projects to repair and replace the country’s aging infrastructure.
Despite the advance in government projects, spending in the category is still down 0.6 percent from a year ago. Public projects have been squeezed for a number of years as governments at all levels have struggled to deal with falling revenue after the 2007-09 recession, the worst downturn in seven decades.
Trump’s plans for increased infrastructure are expected to be revealed when he sends his first budget to Congress early next year.
President Barack Obama sought for a number of years to get Congress to approve higher infrastructure spending, but he was blocked by opposition from Republicans who complained that the projects would increase budget deficits. Democrats in Congress have already expressed support for Trump’s proposals to increase construction spending. His ideas, however, may still face opposition from Republicans worried about high deficits.
The October rise in spending pushed overall construction outlays to a seasonally adjusted annual rate of $1.17 trillion, up 3.4 percent from a year ago.
In another economic development, the Institute for Supply Management’s manufacturing index increased to 53.2 from 51.9 a month earlier, the Tempe, Ariz.based group’s report showed Thursday. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 52.5.
The group’s production gauge climbed to an almost two-year high, propelling the overall measure higher for a third month as manufacturers continued to rebound from a late-summer swoon. The figures also showed factories waited longer for materials to be delivered, a sign of strengthening demand.
“You’re seeing stabilization in manufacturing,” said Brett Ryan, U.S. economist at Deutsche Bank Securities Inc. in New York. “Business investment has been extremely weak,” but this is “a possible signal that we’re seeing business investment stabilize.”
Eleven of 18 industries surveyed by the purchasing managers’ group posted growth in November, including petroleum, paper, plastics, and computers and electronics. That’s the most since July. Six contracted, including the printing, wood products, clothing and electrical equipment sectors.
At the same time, while a recovery in business investment could help brighten prospects for producers, the industry may be held back by recent U.S. dollar appreciation that threatens to slow demand in export markets.
In another development, more Americans filed for unemployment benefits last week. But claims are still at low levels that point to greater job security.
The Labor Department said Thursday that applications for unemployment aid rose by 17,000 to a seasonally adjusted 268,000. The less-volatile fourweek average ticked up 500 to 251,500. The overall number of people collecting unemployment checks was 2.08 million, down more than 5 percent from a year earlier.
Weekly claims are at historically low levels that suggest a stable environment for job seekers. Weekly claims have stayed below 300,000 for 91 straight weeks, the longest streak since 1970, when the total number of workers in the U.S. economy was smaller than today’s levels. The national unemployment rate is 4.9 percent, close to what economists consider full employment.
Workers in October received the largest annual average pay increases in seven years, another sign the job market is healthy.
Economists forecast that the government’s jobs report, to be released today, will show a gain of 174,000 jobs in November, according to data provider FactSet.