U.S. construction spending unexpectedly rebounded in November, lifted by gains in nonresidential structures, but single-family homebuilding continued to be hammered by higher mortgage rates.

The Commerce Department said on Tuesday that construction spending climbed 0.2% in November after falling 0.2% in October.

Economists polled by Reuters had forecast construction spending would decrease 0.4%. Construction spending increased 8.5% on a year-on-year basis in November.

Spending on private construction projects advanced 0.3% after declining 0.7% in October.

Investment in private non-residential structures like gas and oil well drilling jumped 1.7%.

But outlays on residential construction fell 0.5%, with spending on single-family housing projects plunging 2.9%. Outlays on multi-family housing projects increased 2.4%, benefiting from strong demand for rental housing.

The Federal Reserve’s battle to tame inflation with the fastest interest rate-hiking cycle since the 1980s is strangling the housing market, with homebuilding and sales collapsing.

The average 30-year fixed mortgage rate, which breached 7% in October for the first time since 2002, has resumed its upward trend after briefly pulling back in late 2022, data from mortgage finance agency Freddie Mac showed.

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