Construction Spending Dips in August for All but Homes

Construction spending fell in August for the first time in four months despite increased outlays for single-family homes, the Commerce Department said Monday.

“Weakness in non-residential construction continued to weigh down total construction outlays for August,” said Bruce Steinberg, an economist with Merrill Lynch.

Both commercial and government spending declined, contributing to the 1.1% drop in outlays, which fell to a seasonally adjusted annual rate of $456 billion, the department said. It was the first decline since a 1.2% fall in April.

But the report revised July spending to a 0.1% gain, rather than the 0.5% decline estimated by the department a month earlier.

Residential outlays were up 0.5% to a $201.5-billion rate, because of a 0.9% gain in single-family expenditures, the third straight monthly gain. But spending on apartments fell 2.6% after advancing for three months in a row.

“Despite the August weakness, the home building sector should make some gains in the coming months,” Steinberg said. “Housing starts were up strongly in August to their highest level since 1990.”

But some analysts were troubled by declines in new-home sales in both July and August, which could curb new construction. They had been looking to the lowest mortgage rates in more than two decades to spur sales and construction.

Steinberg said although he believes non-residential construction declined during the July-September quarter, he expects “some little improvement” during the final three months of the year.

In August, commercial spending dropped 1% to an $88.1-billion annual rate, the second decline in a row. Declines included industrial and office building, motels and hotels and the category that includes shopping centers.

Government outlays were off even more, down 3.1% to a $124.6-billion rate that wiped out a 2.3% advance in July. Pacing the decline was an 8.4% drop in spending for streets and highways.

Construction Spending

Billions of dollars, seasonally adjusted:

Aug. 1993: 456.0

Source: Commerce Department