Construction spending up 1% in December led by housing projects

WASHINGTON — U.S. construction spending rose a moderate 1% in December as the number of new homes offset a sustained weakness in nonresidential construction.

The increase followed a 1.1% gain in November, the Commerce Department reported Monday. Last month’s strength came from a 3.1% jump in spending on residential projects with money going to singlefamily homes surging by 5.8%.

While home construction is gaining, there was a 1.7% decline in nonresidential construction, which had declines in hotel and motel construction and in the category that includes shopping centers.

Spending on government projects, which had been hit by falling tax revenues, rose 0.5% in December.

In an era of extraordinarily low interest rates, housing has been a star performer over the past year even as other parts of the economy are ravaged by the pandemic.

Economists believe the sharp split between a strong housing sector and weak nonresidential construction may narrow in the coming year as the country pulls out of the pandemicinduced recession.

“We look for a gradual recovery in private, nonresidential investment as the recovery takes hold while we expect the pace of housing starts to moderate slightly,” said Nancy Vanden Houten, senior economist at Oxford Economics.

She said she expected government construction would continue to be constrained by tight state and local budgets.

Construction totaled $1.49 trillion at a seasonally adjusted annual rate in December, 5.7% higher than the level in December 2019.