Construction Spending Holds Steady in August : Economy: Some predict a weak housing market through year-end. However, the proposed U.S. budget raises hope for an easing in interest rates.

Construction spending was flat in August at a seasonally adjusted annual rate of $442.5 billion, the Commerce Department said Monday, and it would have dropped sharply except for a burst of government outlays.

Although the August figures were not as poor as predicted by some analysts, prospects for new building projects remained depressed.

One housing industry analyst said the outlook was not altered by the budget accord reached over the weekend.

“We see an awfully weak housing market through the fourth quarter and the first and second quarters next year even with this budget pact,” said Dave Seiders, chief economist for the National Assn. of Home Builders.

The August construction report showed that new private-sector spending dropped to a seasonally adjusted annual rate of $327.4 billion from $333.9 billion in July.

Within that sector, spending for housing was down to $186.9 billion from $189.1 billion in July, with the closely watched component of single-family homes falling to $108.5 billion from $110.5 billion.

Single-family home starts are seen as a measure of consumers’ confidence about the economy because they generally involve a long-term mortgage commitment.

Mortgage rates now are above 10%--which is considered an important psychological barrier to borrowing--for a standard 30-year loan, although there is some hope for moderate easing in interest rates because of the budget deal.

The department said public construction spending rose in August to a seasonally adjusted annual rate of $115.1 billion from $108.5 billion in July, which forestalled a decline in total construction outlays.

Separately, the nation’s manufacturing economy declined in September for the third straight month to its lowest level in nearly eight years, according to a survey released by the National Assn. of Purchasing Management.

The association said the decline put the manufacturing sector at a level not reached since the first month of the current economic expansion in December, 1982.

The group said its indexes for production, new orders, imports, inventories and employment fell sharply last month. Meanwhile, its price index shot up to the highest level since September, 1988.

“Coupled with sharply rising prices for petroleum-related products spawned by the Middle East crisis, the immediate outlook appears to be the worst of all combinations, a declining economy with rising inflation,” said Robert J. Bretz, chairman of the group’s business survey committee.

The group’s purchasing managers’ index fell to 44.4% from 47% in August. A reading below 50 indicates the manufacturing economy is declining.

CONSTRUCTION SPENDING

Billions of dollars, seasonally adjusted:

Aug. ‘90: 442.5

July ‘90: 442.4

Aug. ‘89: 433.9

Source: Commerce Department