Spending on residential construction took a surprising, if slight, uptick in August. That month's seasonally adjusted annual rate of spending hit $351.7 billion, or 0.3% higher than the adjusted rate in July, according to preliminary estimates released this morning by the Commerce Department's Bureau of the Census. This gain represents the first time since March 2007 that residential construction spending showed a month-to-month increase.
However, spending on residential construction was still down 27.9% from August 2007 as builders across the United States curtail their production activities to those projects they can sell. Several builders interviewed by BUILDER over the past few weeks have said that while they are seeing more buyer interest, many of those buyers are still having trouble securing financing at a time of tightening credit.
Commerce estimates that spending on residential construction by private-sector companies represented $343.6 billion of the total residential spending. That private-sector activity was up 0.3% over July but down 28.4% from August 2007. Public-sector spending on residential construction, at just over $8 billion, was down 0.7% from July but up 4.2% from August of last year.
Commerce estimates that total construction spending in August, at $1.072 trillion, was essentially unchanged from July's figure. That's a victory of sorts for this sector, which economists surveyed by Thompson/FR and Bloomberg News prior to the release of the numbers expected to fall, on a month-to-month basis, by 0.5% in August. Total construction spending in August was off 5.9% from the same month a year ago.
Industry watchers are keeping a close eye on how the credit crisis is affecting nonresidential construction spending, which fell for the third consecutive month in August to $720.5 billion but was up 10.7% from a year ago. TheNew York Times this morning reported on how cities, states, and local governments in New York are cutting back on projects, including construction, because their access to credit is being cut off. Nationally, Commerce's numbers show month-to-month gains in spending for the construction of lodging, offices, health care facilities, highways, and streets. It also reports declines in construction spending for communications, public safety, manufacturing, amusement and recreation, sewer and waste, and water supply.
It's worth noting, though, that spending in August on manufacturing-related construction, at $43.1 billion, was 61.5% higher than in August 2007; and that spending on power facilities, at $54.9 billion, was 26.8% higher than a year ago.
John Caulfield is a senior editor at BUILDER magazine.