U.S. construction spending rises to 5-month high in October
(Reuters) – U.S. construction spending recorded its largest gain in five months in October, easing concerns of a sharp slowdown in fourth-quarter economic growth.
Reports on Tuesday showing unexpectedly stronger automobile sales in November also buoyed growth prospects.
“The economy is on firmer ground than people think, it remains a beacon of light in a world where growth in many countries remains subpar,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
Construction spending rose 1.1 percent, the biggest advance since May, the Commerce Department said.
September’s construction outlays were revised up to show only a 0.1 percent drop instead of the previously reported 0.4 percent fall. Economists said that suggested the gross domestic product estimate for the third quarter could be raised by 0.2 percentage point to a 4.1 percent annual rate.
The government will publish revisions to third-quarter GDP growth data later this month. Spending on residential and nonresidential structures such as factories and power stations previously was reported to have made no contribution to growth.
“We see third-quarter GDP growth being revised up, with most of the upside in business investment in structures,” said Ted Wieseman, an economist at Morgan Stanley in New York.
Economists, who had expected construction spending to rise only 0.6 percent in October, also raised their fourth-quarter growth estimates, which now range between a 1.7 percent and 3.0 percent rate.
Separately, five of the top six automakers sold more cars and trucks last month than analysts expected. General Motors Co reported a 6.5 percent jump, while Chrysler Group said sales had surged 20.1 percent.
Ford Motor Co, however, reported a slight decline.
The upbeat construction and auto sales data suggest some momentum in the economy after weak durable goods orders data last week stoked fears of a sharp moderation in the pace of fourth-quarter growth.
In October, private construction spending increased 0.6 percent, with outlays on residential projects recording their biggest rise since December of last year.