Construction Spending Falls Less than Expected
Posted on February 2, 2009
Filed Under Mortgage Lending |
Construction spending fell less than expected in September as a rebound in nonresidential activity helped offset further weakness in home building. The Commerce Department on Monday reported that construction spending dropped by 0.3 percent in September, less than the 0.8 percent decline many economists had been expecting. Spending had risen by 0.3 percent in August after a huge 2.4 percent plunge in July. The weakness in September was led by a 1.3 percent drop in housing construction, which has fallen every month but two over the past 30 months. Spending on government projects fell by 1.3 percent, the biggest setback since January. The country is undergoing the worst housing slump in decades, a downturn that has triggered the nation’s biggest financial crisis since the 1930s as banks have struggled to cope with billions of dollars of losses on mortgage lending. The Bush administration won congressional passage on Oct. 3 of a $700 billion rescue package designed to stabilize financial institutions by buying up bad ets and through direct government purchases of stock in banks. Both programs are aimed at boosting banks’ balance sheets in an effort to get them to resume more ordinary lending. However, many economists believe the massive government support effort will not come in time to prevent the country from experiencing the most severe recession in decades. For September, the 0.3 percent fall in overall construction was the third drop in the past four months. It left total building activity at an annual rate of $1.06 trillion in September, down 6.6 percent from the level of a year ago. There is some concern that the weak economy will cause state and local governments to cut back on spending, making the downturn more severe. Democrats in Congress are pushing for a second economic stimulus bill that would include money to support spending on highways, bridges and other infrastructure projects.
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