US builders trimmed work for second month
WASHINGTON -- U.S. builders trimmed their activity for a second straight month in August as a solid gain in home construction failed to offset declines in nonresidential activity and government projects.
Overall construction spending dipped 0.7 percent in August, compared to July, the Commerce Department reported Monday. In July, spending had fallen 0.4 percent.
The August decline left spending at a seasonally adjusted annual rate of $837.1 billion, which is 12.2 percent above a 12-year low hit in February 2011. Still, construction activity is roughly half of what economists consider to be healthy.
One bright spot in the August report was a 0.9 percent increase in private residential construction, another sign that housing is recovering following a prolonged slump. In August, both single-family and apartment construction was up.
The August gain in private residential construction pushed this sector up to a seasonally adjusted annual rate of $273.5 billion, 17.8 percent above a year ago.
Private nonresidential activity fell 1.7 percent in August, dropping to an annual rate of $288.7 billion. That was still 7.2 percent higher than a year ago. In August, spending on office buildings, commercial projects such as shopping centers and hotels all fell.Public construction activity dropped 0.8 percent in August to a seasonally adjusted annual rate of $274.9 billion, down 3.5 percent from a year ago. In August, state and local activity fell 0.9 percent compared to July to a seasonally adjusted annual rate of $249.7 billion. Spending on federal projects edged up 0.3 percent in August to $25.2 billion.
The rebound in housing is evident in a pickup in construction and the fact that home prices have started to post consistent increases. Construction of single-family homes rose last month to the fastest annual rate in more than two years. Sales of newly built and previously occupied homes are up compared to last year, helped by the lowest mortgage rates on record.
While the housing market has strengthened this year, the broader economy has languished. High unemployment and weak wage growth have kept consumers from spending more freely. Manufacturing has stumbled, and businesses are investing less.
The Federal Reserve is hoping to drive mortgage rates lower to make home buying more affordable, and therefore help the economy grow. Earlier this month, it said it would spend $40 billion a month to buy mortgage-backed securities until the job market shows substantial improvement.
The broader economy is likely to benefit from a stronger housing market. When home prices rise, people typically feel wealthier and spend more. Consumer spending drives nearly 70 percent of economic activity.
Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.