Construction Spending Falls as Residential Building Weaknesses Persists
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Construction spending fell in September as home building declined for a sixth consecutive month, the longest stretch of weakness in residential construction in more than a decade.
The Commerce Department said that spending on construction projects dropped by 0.3 percent to a seasonally adjusted annual rate of $1.196 trillion in September. It was the biggest decline since a 0.7 percent fall in July and the fifth month in which overall construction activity has either declined or been flat.
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Housing was down 1.1 percent in September, reflecting the steep slump in this once booming sector as builders have slashed construction plans in the face of slumping sales demand.
In a second report, the Institute of Supply Management said its closely watched gauge of manufacturing activity edged down to 51.2 in October, compared to a September reading of 52.9. The October performance was below the 53.0 that analysts had been expecting.
The government reported last week that the overall economy slowed to a lackluster growth rate of just 1.6 percent in July-September quarter, the slowest pace in more than three years, as housing construction plunged at a rate of 17.4 percent, the steepest drop in four quarters of declines.
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Some economists have worried that the sharp drop in housing could rattle consumer confidence and push the country into a recession. However, those fears have lessened somewhat in recent weeks as gasoline prices, which had surged above $3 per gallon, have retreated, leaving consumers with more money to spend on other items.
For September, the 1.1 percent drop in private residential construction was the sixth consecutive decline of 1 percent or more. It pushed total spending in this area down to $312.7 billion at a seasonally adjusted annual rate.