Construction Spending Posts Modest Rise

Wed December 04, 2002 - National Edition

WASHINGTON (AP) Construction spending edged up a modest 0.3 percent in October

with the strength centered in a big gain in construction of schools, hospitals and other non-residential buildings.

The Commerce Department reported that spending on building projects around the nation rose to a seasonally adjusted annual rate of $834.6 billion in October.

The October increase, which was slightly better than had been expected, matched the 0.3 percent gain in September. Both months showed increases following a large 1 percent drop in August.

Meanwhile, a closely watched gauge of the health of the nation’s factories showed that manufacturing activity posted a slight rise in November, but remained below the level that is normally viewed as sign of growth.

The Institute of Supply Management said its index of business activity in manufacturing rose to 49.2 last month, a slight improvement from the 48.5 reading in October. However, analysts view any reading below 50 as a sign that the manufacturing sector is not growing. The last time the index was above 50 was in August.

The October gain in construction activity was led by a strong 1 percent rise in spending for non-residential buildings, which rose to an annual rate of $158.3 billion for the month. The increase followed a 2 percent drop in non-residential activity in September.

The strength in October was led by a 10 percent jump in spending on educational buildings, followed by a gain of 2.2 percent in spending on hospital construction.

Spending for construction of homes and apartments was up slightly to $412.3 billion in October, only a 0.1 percent rise from the September level of $412.1 billion.

Residential construction has been one of the leading bright spots in the uncertain economic recovery as the lowest mortgage rates in a generation have spurred record home sales. Residential construction was up 0.7 percent in September.

Government spending, which has also been strong for most of the year, dropped by 0.3 percent in October to an annual rate of $205.4 billion, following a 1.6 percent surge in September. The weakness was led by 3.8 percent decline highway construction, one of the biggest categories in the government sector.

President Bush recently signed a bill that will reimburse the insurance industry by up to $100 billion in a future terrorist attack, a measure he claimed was critical to unblock a logjam in the construction industry and help boost prospects for a stronger economic recovery.

Bush campaigned for the bill as he stumped for GOP candidates this fall, asserting that failure by lawmakers to pass a terrorism insurance bill had stalled $15 billion in construction projects because companies were reluctant to finance projects that couldn’t get insurance.

The 0.3 percent increase pushed overall construction activity to an annual rate of $834.6 billion, compared to an annual rate of building of $832.5 billion in September.

The Commerce Department, using more detailed figures than supplied with its report, put the increase at a slightly smaller 0.2 percent increase for October.