WASHINGTON (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.
The growth outlook also got a boost from strong automobile sales in November.
“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 on Tuesday.
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, auto sales raced to an annual rate of about 17.1 million units in November, the best pace for that month since 2003 and well ahead of analysts’ estimates for a rise to a rate of 16.7 million units.
General Motors Co, Chrysler Group, Toyota Motor Corp and Honda Motor Co all reported year-to-year sales gains in November, while Ford Motor Co and Nissan Motor Co Ltd had modest declines.
The upbeat construction and auto sales data indicate 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 posting their biggest rise since December of last year.
Residential spending was boosted by increases in both single and multi-family homes as well as renovations.
Spending on public construction projects increased 2.3 percent in October as federal government outlays recorded their largest gain in eight years. State and local government investment snapped two straight months of declines.
Reporting by Lucia Mutikani; Additional reporting by Ben Klayman and Bernie Woodall in Detroit; Editing by Paul Simao