Construction spending rises 0.9% in December

WASHINGTON — Spending on U.S. construction projects rose in December, ending a year in which construction activity increased for the first time in six years.

Construction spending rose to a seasonally adjusted annual rate of $885 billion in December, the Commerce Department said Friday. That was up 0.9 percent from November, when spending increased a revised 0.1 percent.

For all of 2012, construction spending totaled $850.2 billion, a gain of 9.2 percent from 2011, when construction spending had fallen 3.3 percent. Even with the increase, construction activity is 27.2 percent below the all-time high of $1.17 trillion, set in 2006 at the peak of the housing boom.

Construction has been posting a slow recovery, led by housing gains. In December, housing and nonresidential construction posted gains but spending on government projects fell.

“When we see volumes pick up, that makes home builders feel more comfortable about going out and creating new houses because they feel like the market’s starting to pick up,” Andres Garcia Amaya, a U.S. market strategist at JPMorgan Investment Management in New York, said before the report. “There’s just not enough houses out there for people to buy.”

The construction gains are helping the overall economy, which has added nearly 100,000jobs over the past four months.

In December, spending on residential projects rose 2.2 percent compared with November, the ninth straight monthly gain. Spending on nonresidential projects rose 1.8 percent in December after a 0.3 percent drop in November.

Spending on government projects fell 1.4 percent to $270.1 billion, the lowest level since November 2006. Government activity has been constrained by tight budgets. In December, spending on state and local government projects fell 1.7 percent while spending on federal projects was down 1.3 percent.

U.S. manufacturing activity grew at a faster pace in January, driven by an increase in new orders and more hiring at factories.

The Institute for Supply Management said Friday that its index of manufacturing activity jumped to 53.1 in January from 50.2 in December. It was the highest reading since April, when the index hit 54.1.

Any reading above 50 indicates expansion.

The second straight monthly increase in the index showed manufacturing is starting to grow again after struggling through most of 2012. Uncertainty about tax increases and deep government spending cuts led many companies to reduce orders for machinery and equipment earlier this year. And a weaker global economy dampened demand for U.S. exports.

The report was also encouraging, because it showed that demand for factory goods increased even as consumers started to pay higher Social Security taxes.

The survey came hours after the Labor Department reported that the job market held steady at the end of last year even as economic growth stalled.

“There’s a fair bit of optimism here to start the year,” said Dan Greenhaus, chief global strategist with BTIG LLC, a trading firm based in New York.

Information for this article was contributed by Daniel Wagner and Martin Crutsinger of The Associated Press, and Michelle Jamrisko of Bloomberg News.