U.S. Construction Spending Rises an Unexpected 0.3% in September

Construction spending posted a surprise 0.3% gain in September following a downward revision for August, the Commerce Department said Wednesday. Spending rose to a seasonally adjusted $1.16 trillion after August spending was revised from a 0.2% rise to a 0.2% decline. Analysts were expecting the September figure to be a 0.5% drop. Private nonresidential construction rose 1.5% and public construction spending 1.9%, both record highs. They offset a 1.4% drop in private residential spending in September to a $511 billion annual rate, the 19th consecutive monthly decline and the lowest in four years. Housing spending is down 16.4% over the past year; total construction spending is down 0.8%. Federal construction spending fell 7.9% in September following a 3.6% rise in August. State and local construction spending rose 2.7% and public-sector spending 1.9%. "I don't think you have reached the point where nonresidential has turned down," said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. "I think that's a next year phenomenon." In related news, the Commerce Department also announced Wednesday that the U.S. economy bucked the housing trend and increased at a 3.9% annual rate in Q3 -- the best GDP growth performance in six quarters (full story).

Sources: Bloomberg, MarketWatch, Business Week, Reuters
Commentary: Government Construction Spending Is Where It's At • The Worst is Yet to Come for Housing
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Comments

[CrossProfit_:]

Very informative article, thank you.

Perhaps a better metric would be to follow the sq. feet under construction. This way we will know how much of the 0.3% gain recorded in September is inflation related. Analysts could still be correct in their analysis that construction activity fell 0.5% in September, yet overall dollar spending is up 0.8% due to higher costs of raw materials.

Public construction projects are laggards when it comes to higher costs, meaning that they usually don't get cancelled when an additional 5% is added to the original estimates. We wouldn't read too much into this figure.

CrossProfit

2007 Nov 01 05:59 AM