Construction Spending Increases 0.9% in August

Record outlays for commercial buildings boosted construction spending in August, but the increase was offset by a third straight decline in government projects and flat residential expenditures, according to government figures released Wednesday.

Spending on residential, nonresidential and public projects rose 0.9% to $562.1 billion at a seasonally adjusted annual rate, the fourth increase in six months, the Commerce Department said.

Still, the advance, which was in line with analysts’ expectations, failed to erase the 1.1% decline in July, even though the July figure was not as weak as its initial 1.4% estimate.

Despite the August performance, many analysts believe construction spending in the third quarter will fall below the average for the previous three months.

“This is an important piece of the economy and appears to be swinging from a strong second quarter to a much weaker third quarter,” said economist David F. Seiders of the National Assn. of Home Builders.

“Unless July and August are revised up and September comes in strong, it certainly will contribute to a slowdown in growth in the third quarter,” he said.

The Federal Reserve Board has been expecting economic growth to moderate. Officials decided last week they did not need to brake growth further with higher interest rates.

Paced by a 12.3% jump in construction of hotels and motels, nonresidential spending rose 3% to a $139.5-billion annual rate, the highest on record. Outlays in the category that includes shopping centers were up 6.1%.

But residential spending, which accounts for 40% of the total, was virtually unchanged at a $244-billion rate. Spending on single-family houses edged up just 0.1%., same as the July increase.

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Construction Spending

Seasonally adjusted, in billions of dollars:

1996: $562.1

Source: Commerce Department