September Construction Spending Holds Steady

WASHINGTON D.C. - The Commerce Department reported Monday that construction spending was essentially flat in September after big gains of 0.9 percent in August and July.

Construction put in place in September ran at a $1.014 trillion annual rate, $136 million lower than in August. The data for August were revised upward slightly, to a 0.9 percent gain from the previously reported 0.8 percent increase.

The sharp slowdown reflected a 0.2 percent drop in residential construction, the first decline in this category since February 2003. Residential building activity, which still totaled $560 billion at an annual rate, has been red-hot in recent years, reflecting the lowest mortgages rates in four decades.

"Today's report from the Census Bureau on the value of construction put in place in September contains largely good news, tempered by the oppressive rise in materials costs,?EUR??,,????'?? Kenneth Simonsen, chief economist of the Associated General Contractors of America, said. ?EUR??,,????'??A look at the year-to-date figures, which give a truer picture than volatile monthly numbers, shows gains in nearly all public and private nonresidential categories as well as residential construction.?EUR??,,????'??

Nonresidential building activity posted a 0.3 percent increase in September, coming in at an annual rate of $453.9 billion, reflecting strength in hotel and motel construction, schools and churches.

Private construction was down 0.1 percent in September, the first decline since January, to an annual rate of $777.5 billion, but this weakness was offset by a 0.3 percent rise in government construction activity which rose to $236.4 billion. The strength in government activity reflected a 3 percent jump in office construction, which helped offset a 1.5 percent drop in highway construction.

"The rapid rise in costs--for steel, petroleum products such as diesel fuel, asphalt, and oil-based roofing, plumbing, and insulation materials-means many contractors are not making money in spite of a rise in activity.?EUR??,,????'?? Simonsen said. ?EUR??,,????'??Nevertheless, the outlook remains moderately positive for a further expansion in many nonresidential private and public categories.?EUR??,,????'??