Construction Spending Rises 0.5% in Month

Construction spending rose 0.5% in October as increased activity in residential building offset a big drop in construction of shopping centers, the Commerce Department said Monday.

The department said the October increase followed a 0.4% September advance that had originally been reported as a much stronger 1.9% rise.

The October gain, the biggest since a 1.1% jump in June, left spending at a seasonally adjusted annual rate of $347.8 billion. This was 9.3% ahead of spending in October, 1984.

Analysts said the increase last month came from broad-based strength in a variety of areas.

“Here in the 14th quarter of an economic expansion, one would expect some decline, and yet construction is doing so well,” said Michael Sumichrast, chief economist for the National Assn. of Home Builders. “It is not that one particular sector is very strong, but the combination makes the whole look pretty good.”

Sumichrast predicted that construction spending next year would climb by another 2% to 3% over this year’s activity level, with declining interest rates contributing to the advance.

For October, residential construction rose 2% to an annual rate of $151.4 billion, with much of the strength coming in construction of dwellings with two or more units. This segment showed a 4% gain, while construction of single-family homes rose by just 2%.

Non-residential construction edged down 1% last month to a rate of $88.7 billion, with the total depressed by a large 5% drop in construction of shopping centers and other commercial buildings.

Sumichrast noted that, even with the decline in shopping centers, construction was still 18% above where it was a year ago.

Factory Building Up

Construction of office buildings was unchanged at a rate of $31.5 billion, 12% higher than a year ago.