WASHINGTON -- Construction spending in October registered its best month on record an encouraging sign that the economic recovery has staying power.
The Commerce Department reported Monday that the total value of building projects under way came in at a seasonally adjusted $922 billion in October, representing a 0.9 percent increase from the previous month.
The $922 billion level was an all-time monthly high, and the percentage change from the previous month was even better than the 0.6 percent rise that analysts were forecasting.
The strength in construction was fairly broad based, with spending by private builders on residential construction and spending by government on big public works projects each posting the highest monthly level on record.
Fed action unlikely
Amid signs the economic recovery is on firm footing, the Federal Reserve is expected to hold a key short-term interest rate at a 45-year low of 1 percent at its next meeting on Dec. 9. Economists believe rates could stay at such super-low levels into part of 2004.
The economy grew at a blistering 8.2 percent annual rate in the third quarter, the best performance in nearly two decades. Economic activity is expected to slow to around a 4 percent rate in the current quarter, which would still mark a solid showing.
The housing market has been an important pillar supporting the economic recovery and was a main contributor to economic growth in the last quarter.
In October, spending by private builders on residential projects grew by 2.2 percent from the previous month to a rate of $484 billion, an all-time monthly high. For private builders, those gains helped to offset cutbacks in spending on other types of construction, including factories and hotels and motels.
Low mortgage rates have powered the housing market through economic hard times and now the economic resurgence. Home sales are expected to register their best year ever for all of 2003.
Rates on benchmark 30-year mortgages slid to 5.21 percent in the middle of June, the lowest level in more than four decades. Since then, rates on these benchmark mortgages have bounced up and down. Rates on 30-year mortgages now stand at 5.89 percent.
Spending by government on big public works projects increased by 1.2 percent in October from September to a rate of $224.7 billion, also the best month on record. Stronger spending on schools, health-care and transportation facilities helped to blunt weaker spending on highways and streets.