Construction spending climbs most in 4 months

By Bloomberg News

(Bloomberg) – Construction spending in the U.S. rose in December at the fastest pace in four months, reflecting broad-based gains that signal the industry is stabilizing.

Building outlays increased 1.5%, the biggest gain since August, Commerce Department figures showed Wednesday in Washington. The median estimate of 51 economists in a Bloomberg survey called for a 0.5% rise.

A housing market that is gaining some steam as builders begin apartment projects may breathe life into the industry that’s struggled since triggering the recession in 2007. At the same time, decreased spending by the government may temper progress in construction as a whole.

“There are certainly bright spots for the construction outlook,” Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, said before the report. “Multifamily construction will continue to improve given the ongoing shift from owning to renting and the lack of supply in the market. It will still be a very slow healing process.”

Estimates in the Bloomberg survey ranged from a drop of 0.6% to an increase of 1.5%. The Commerce Department revised the November reading down to a 0.4% gain from a previously estimated increase of 1.2%.

A report Wednesday from ADP Employer Services showed companies added 170,000 workers to payrolls in January, reflecting job gains in services and at small businesses. The increase followed a 292,000 gain the prior month.

Construction outlays were down 2% in December from the same time in 2010, before adjusting for seasonal variations.

Private construction spending rose 2.1% in December from the prior month, the biggest gain since May. The increase brought the value up to $529.7 billion at an annual rate, the highest level since December 2009.

Homebuilding outlays increased 0.8%, including a 0.2% increase in home improvement. Non-residential building climbed 3.3%.

Spending on public construction advanced 0.5%, the report said. Federal construction spending increased 0.3%.

The homebuilding industry is trying to recover from record- low traffic last year. About 302,000 new homes were sold in the U.S. in 2011, the worst year in data dating to 1963, Commerce Department figures showed Jan. 26.

Housing starts fared better, growing by 3.4% last year to the highest level since 2008. The strength came from work on multifamily dwellings, which jumped as more Americans opted to rent rather than own. Conversely, single-family home construction in 2011 was the weakest in records going back to 1959.

The market may be beginning to stabilize. Builders broke ground on 470,000 single-family houses at an annual rate in December, the most since April 2010, the Commerce Department said Jan. 19. Residential construction added 0.23 percentage points to gross domestic product in the fourth quarter, the largest contribution since the April-June period of 2010.

Home sales and construction will improve in 2012, adding “modestly” to economic growth, according to a Fannie Mae forecast last month. Sales of new and existing homes are likely to increase 3.5%, and housing starts are projected to rise 16%, the group’s chief economist said Jan. 13.

Homebuilder sentiment has also ticked up. The National Association of Home Builders/Wells Fargo sentiment index rose in January to the highest level since June 2007 as sales and buyer traffic improved.

“Although macroeconomic and housing conditions remain soft, we are cautiously optimistic for the remainder for 2012,” Donald Tomnitz, CEO of Fort Worth, Texas-based D.R. Horton Inc., said in a Jan. 27 conference call. “Simply put, our business feels more positive.”

The largest U.S homebuilder by volume reported net home orders that rose to 3,794 in final three months of 2011 from 3,363 a year earlier.

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