Construction Spending Up 1.8% in August

Construction spending posted its biggest advance this year in August, the government said Monday, but the gain was in government and non-residential building while the single-family housing industry continued to sag.

The Commerce Department said overall spending increased 1.8%, up $7.3 billion to a seasonally adjusted annual rate of $421.8 billion, the first gain since May’s 1.4% advance.

Analysts expect building construction to remain at the current level for the remainder of the year as the economy continues to grow at a modest pace.

“All signals point to not too much change from recent trends,” economist Mark Obrinsky of the Federal National Mortgage Assn. said. “I don’t think we’re going to see a boom or a bust in either residential or non-residential construction.”

Government Building Rose

Analysts have been looking for a slight pickup in construction spending 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 and to 10.16% last week, according to a survey by the Federal Home Loan Mortgage Corp.

The Commerce Department said the August advance was the biggest since a 2.3% increase last December and followed declines of 0.6% in July and 0.8% in June. The July figure had been revised downward from a minuscule 0.02% gain.

Government building, a volatile sector representing about 20% of construction spending, was up 5.3% in August.