August construction spending rose to the highest level since January, according to a report the Commerce Department released Wednesday.
The total value of building projects currently underway is $882.7 billion, a 0.2 increase from July. Seasonally adjusted spending in August was also 4 percent higher than August 2002. Still, the project value increase was 0.2 percent short of what economists predicted in January.
The report also showed that government spending on public works projects rose by 0.6 percent in August. Although spending on schools, transportation projects and recreational facilities is in a slump, stronger spending on public housing, highways/streets and medical buildings could make a difference in the non-residential sector.
“Public construction produced a pleasant surprise,” said Ken Simonson, chief economist for the Associated General Contractors of America. “The August level was 3 percent higher than in 2002, in spite of spending cutbacks by state and local governments.”
The Institute for Supply Management, which surveys manufacturing purchasing managers on a monthly basis, recently released another upbeat report. It gave the construction industry a positive reading for September — 53.7 — for the third consecutive month. Any score above 50 indicates expansion in the industry.
Simonson said the report is a good omen “that will eventually help factory, warehouse and other construction.”
Economic analysts say the economy is growing at a rate of more than 5 percent, and that it should be able to maintain growth above 4 percent during the fourth quarter of this year. If this is the case, the economy would record the strongest back-to-back growth rates since the end of 1999.