September's unexpected 0.5% increase in construction spending was tempered somewhat by the fact that August's tally was revised downward, dropping considerably from the initially estimated 0.4% spending gain to a 0.2% decrease.

A Bloomberg survey had expected construction spending to fall 0.5% in September. Construction spending fell 2.6% in July, and was essentially unchanged in June. On a year-over-year basis, construction spending totaled a seasonally adjusted annual rate of $801.7 billion, or down 10.4% from a year ago, in September 2009. That's a substantial improvement from the 11.5% year-over-year decline recorded in August.

Another noticeable improvement in the September construction report concerned private construction, which was essentially unchanged at $482.0 billion -- its best one-month performance since it rose in April. Private, residential construction, which includes single-family homes, rose 1.8% to an annual rate of $227.7 billion. However, private, non-residential construction, which includes shopping malls and office buildings, declined 1.6% to a rate of $254.3 billion.

Meanwhile, public construction spending, which includes fiscal stimulus infrastructure projects, rose 1.3% in September to a seasonally adjusted annual rate of $319.7 billion.

Economists follow the U.S. Commerce Department's construction spending report because it provides the most comprehensive survey of both public sector and private sector (residential, commercial) building activity.

September Construction Report: Mixed Results

The September construction report was a qualified, positive data point for the sector and for the U.S. economy. The fact that private, residential construction rose is a cause for minor celebration. The private, residential component includes single-family homes, and activity in the sector declined sharply following the end of the original home buyer credit in April. The minor uptick in home building in September suggests that home builders are taking on selected, new projects -- but you can rest assured that most of these single-family homes have already been paid for by buyers – not built "on speculation" or for buyers not yet secured. Still, if the uptrend continues, it would be a ray of light for the hard-hit home-building sector.

Meanwhile, the decline in private, non-residential construction, also called commercial construction, was not surprising. It's typical in a U.S. economy that features above-average vacancy rates in the nation's indoor malls and outdoor shopping centers. Further, if consumer spending does not trend back to pre-financial crisis levels, that will likely lengthen the recovery time for commercial construction.

In light of the revised decline in August construction spending, the picture is one of a tepid U.S. building sector -- something one would expect with a U.S. economy that's growing at a 2% rate, or well below its potential.

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November 02 2010 at 10:21 AM Report abuse rate up rate down Reply

The biggest scam on government projects is the "Buy American Act". It originally was started to preserve jobs in the US. Any projects funded with taxpayer's money was supposed to use only goods manufactured in the US. Now, it's goods manufactured in the US and by our "trading partners", like countries where the greedy corporations have outsourced jobs. "Made in Taiwan", "Made in South Korea", "Made in Mexico".....are "Buy American". This type of pandering will grow if the GOP and teabaggers have their way. The "Buy American" act needs to be cleaned up so it protects American workers, and prevents our tax money from going to other countries to profit corporations.

November 02 2010 at 8:23 AM Report abuse rate up rate down Reply

SO government spending projects dwarf private construction and this is seen as a good thing??? Sure Caterpillar is doing pretty good but most of those sales are to foreign markets. I have a good waste of taxpayer funds. In Aurora Ohio state route 43 was two lanes since it was first paved. There were plans to expand the road to four lanes due to traffic caused by Sea World and Geauga Lake. The project never got past the shovel ready stage. However under Obama's stimulus the road has now been widened. The problem, Geauga Lake and Sea World no longer exist and the road doesn't carry enough traffic to warrant the expansion anymore. There are projects like this all over the country wasting taxpayer money just to keep a few construction workers employed. The problem is that they have moved so many projects up that there won't be any need for so many workers as soon as the jobs are done.

November 01 2010 at 3:06 PM Report abuse +1 rate up rate down Reply
Americas Watchdo

We have the Corporate Whistleblower Center and we are not very thrilled public funded construction projects that do little more than waste money we do not have. Take as an example a the 73 Toll Road in California----it did not need to be resurfaced. However-with President Obama's stimulus money it was repaved. If you have specific information about this type of Government waste there could be rewards & we would love to hear from you.

November 01 2010 at 2:14 PM Report abuse rate up rate down Reply