Construction spending in the United States climbed to an all-time high in December, helping to push building for all of 2005 to a record as well.
The Commerce Department reported that spending rose by 1 percent in December as private construction and government spending on building activities set records. For the year, spending to construct homes, offices, highways and other building projects totaled a record $1.120 trillion, up 8.9 percent from the previous record of $1.028 trillion spent in 2004.
Construction has been enjoying boom times, led by the red-hot housing market, which has enjoyed record sales over the past five years spurred by the lowest mortgage rates in more than four decades.
However, economists are predicting that home sales will slow this year under the impact of higher mortgage rates. The Federal Reserve on Tuesday boosted a key short-term lending rate for the 14th consecutive time since June 2004 as it continued efforts to slow the economy and make sure that inflation does not get out of control.
Many economists believe that the central bank, now headed by new chairman Ben Bernanke, will raise rates one more time at its next meeting on March 28 but then remain on hold for the rest of the year.
That should produce only a gradual further rise in mortgage rates, which should produce only a moderate slowdown in housing activity this year. However, if the Fed has to raise rates higher because inflation is threatening to get out of hand, analysts have cautioned that housing could suffer a bigger tumble.
The Commerce report said that private residential construction rose by 1 percent in December to an all-time high of $648.9 billion at a seasonally adjusted annual rate. The increase came after no change in November.
Private nonresidential construction was up 1.3 percent with building of offices, hotels and shopping centers all showing gains. Total private construction, which covers residential and nonresidential structures, rose by 1.1 percent to a seasonally adjusted annual rate of $904.3 billion in December, also a record.
Total public construction was up 0.7 percent to a record $256.3 billion with spending on federal and state and local projects both setting all-time highs.
Federal building projects rose by 6.7 percent to $19.5 billion, while state and local construction spending rose by 0.2 percent to $236.8 billion.