AP News

Ahead of the Bell: US construction spending


WASHINGTON (AP) — U.S. builders likely spent more on construction projects in September.

The forecast is that construction spending grew 0.7 percent in September compared to August, according to a survey of economists by FactSet. The Commerce Department will release the report at 10 a.m. EDT Thursday.

In August, construction spending fell 0.7 percent because of cuts in public projects and commercial real estate. But spending on home construction rose again, further evidence of a housing recovery.

Still, the level of spending remains roughly half of what's considered healthy.

The August decline lowered construction spending to a seasonally adjusted annual rate of $834.4 billion. That's nearly 12 percent above a 12-year low hit in February 2011.

Spending on residential projects rose 0.9 percent in August. That pushed residential spending to a seasonally adjusted annual rate of $273.5 billion, nearly 18 percent above the level from a year ago.

Spending on single-family homes increased in August for the fifth straight month, while apartment construction spending rose for the 10th month in a row.

That strength stood in contrast to spending on commercial projects such as office buildings, shopping centers and hotels, which fell in August. Government activity was also down in August as a decline in state and local building offset a small increase in federal projects.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

Home builders started work on new homes and apartments at the fastest pace in more than four years in September. They also requested the most building permits in four years, a sign that many are confident that recent gains in home sales will continue.

New home sales in September jumped to the highest annual pace in the past two and a half years. Sales of previously occupied homes dipped in September but have risen steadily in the past year.

Home prices rose in August compared to July in 19 of 20 major cities tracked by the Standard & Poor's/Case Shiller index. Prices were up nationally by 2 percent in August compared to August 2011, the third straight increase and faster than the July gain.

While the housing market has strengthened this year, the broader economy has lagged behind. The overall economy grew at an annual rate of 2 percent in the July to September period. That was an improvement from 1.3 percent growth in the April-June quarter but still too slow to make a significant improvement in unemployment.

The Federal Reserve in September said it would spend $40 billion a month to buy mortgage-backed securities to give a boost to home sales in hopes that it will support faster economic growth and stronger gains in the job market.


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