US construction spending enjoys modest rise

Construction spending in the US was up slightly more in August than had been expected, driven by an increase in public sector construction funded by federal money.

According to figures released by the Commerce Department, total construction spending rose to $811 billion, up 0.4 percent from July, on a rolling 12 month basis. The picture is still quite bleak, however, compared to a year ago when construction spending reached $902 billion in the 12 months leading to August 2009.

Led by highways and sewage and waste disposal plants, construction in the public sector rose 2.5 percent to $317 billion, achieving a record 39 percent of all construction spending, but this gain was almost completely offset by a 0.9 percent decline in private sector construction.

The residential market was down 0.3 percent to $242 billion, while non-residential work for the 12-month period fell 1.4 percent to $343 billion.

The immediate outlook is not encouraging, as government construction spending is likely to slow as the impact of the federal stimulus fades and state budgets shrink.

Other figures from the Commerce Department today showed consumer spending rose 0.4 percent in August for a second month. Incomes were up 0.5 percent, the biggest advance this year.The overall economy expanded at a 1.7 percent annual rate in the second quarter, compared with 3.7 percent in the previous three months.

A separate report today from the Institute for Supply Management showed manufacturing continues to expand, but at a slower rate than in recent months. The Tempe, Arizona-based group’s factory index fell to 54.4 from 56.3 in August. Readings greater than 50 signal growth.