Construction Spending Rises 1.8% in August

Construction spending rose 1.8% in August, its first advance in three months and the largest this year, the government said today in a report indicating the building industry may be pulling out of its slump.

The Commerce Department said spending increased $7.3 billion to a seasonally adjusted annual rate of $421.8 billion in August. That followed decreases of 0.6% in July and 0.8% in June. Spending rose 1.4% in May.

The August advance was the biggest since a 2.3% gain in December, 1988.

Analysts have been looking for a pickup in construction spending ever since interest rates began falling earlier in the year. Fixed-rate mortgage rates declined from a peak of 11.22% in March to 10.22% at the end of August, according to a survey by the Federal Home Loan Mortgage Co.