Construction spending down 0.7% in Aug; ISM manufacturing index hits 51.5 in Sept.

ISM manufacturing index 51.5 in September
ISM manufacturing index 51.5 in September

U.S. construction spending fell in August for the second straight month to its lowest level in eight months, an unexpected drop driven by weakness across public and private sectors.

The successive declines suggest home building might not help economic growth in the third quarter.

The Commerce Department said on Monday construction spending dropped 0.7 percent in August to a seasonally adjusted annual rate of $1.142 trillion, the lowest since December 2015. Economists had expected outlays to rise 0.2 percent.

The government also revised downward its estimate for July, saying spending declined 0.3 percent rather than the initial estimate that outlays were unchanged.

In August, private construction spending fell 0.3 percent, with outlays on residential construction down by the same amount.

Spending on private nonresidential structures fell 0.4 percent in August.

Public construction spending dropped 2.0 percent in August to the lowest level since March 2014, with lower spending reported for highways and schools.

ISM Manufacturing Index.

Eddie Seal | Bloomberg | Getty Images

U.S. manufacturing rebounded in September after contracting in August, according to The Associated Press. New orders and production at factories increased, although employment fell -- a sign that manufacturers have yet to fully stabilize after a difficult year.

The Institute for Supply Management says its manufacturing index rose to 51.5 in September from 49.4 in August. Any reading above 50 signals expansion.

U.S. factories have faced a brutal slowdown over the past year. The strong dollar made their goods less affordable overseas, hurting exports. Lower oil prices caused energy companies to cut back on orders of equipment and pipeline. Auto sales have also leveled off this year after reaching a record level in 2015.

A measure of employment was 49.7, its third straight month of decline. That is a sign manufacturers are laying off workers.

— The Associated Press and contributed to this report.