Spending On Construction Bounces Back

Construction spending rebounded 0.9 percent in August for the fourth increase in the last six months.

The Commerce Department said Wednesday residential, non-residential and government outlays totaled $562.1 billion at a seasonally adjusted annual rate after falling a revised 1.1 percent in July. The initial estimate for July was a 1.4 percent decline.

It was the largest advance since a 1.4 percent gain in April. The increase was in line with analysts’ expectations and added weight to arguments the Federal Reserve may have to increase interest rates soon to slow the economy and avoid a surge in inflation.

Residential outlays, including remodeling projects, were unchanged at a $244 billion rate after falling for three straight months as high mortgage rates topped 8 percent.

Spending on single-family homes inched up 0.1 percent for a second straight month. This category represents nearly 30 percent of total construction outlays.

The single-family market is particularly interest-sensitive since a 1 percentage point increase in mortgage rates would add more than $100 to many monthly payments.

Thirty-year, fixed-rate mortgages have averaged 8 percent or more this summer, compared to just 7 percent last January.

Spending on multifamily projects such as apartments and condominiums, which are not as sensitive to interest-rate changes, rose 3.4 percent. This often-volatile category plunged 14.4 percent in July.

Nonresidential spending, about one-fourth of the total, jumped 3 percent to a record $139.5 billion rate, up from $135.5 billion in July when it fell 1.6 percent.

Spending on hotels shot up 12.3 percent. The category that includes shopping centers was up 6.1 percent.

Government outlays, held back in recent months by budgetary cutbacks, fell 0.2 percent.