Washington, DC, Oct. 1--Construction spending in August climbed to the highest level seen since the beginning of this year as the value of residential projects by private builders posted its best month on record.
The Commerce Department reported Wednesday that the total value of building projects under way came in at a seasonally adjusted annual rate of $882.7 billion in August, representing a 0.2 percent increase from July's level.
Although the increase in spending in August wasn't as strong as the 0.4 percent rise that economists were predicting, the $882.7 billion rate of spending marked the highest level since January.
The value of all construction projects by private builders edged up by 0.1 percent in August to a rate of $665.4 billion.
Private builders trimmed spending on office buildings, health care facilities and some other projects, but they continued to plow money into residential buildings, which accounted for $453.4 billion worth of spending in August, an all-time monthly high.
The housing market has been one of the main sources of strength for the economy, which is trying to work its way back to full throttle.
Even with a recent gyration in mortgage rates, sales of both new homes and previously owned ones soared in August and are on track to set new record highs this year.
Rates on 30-year mortgages slid to 5.21 percent, the lowest level in more than four decades, in the middle of July. But shortly thereafter, investor concerns about the economy and the Federal Reserve's recent hold-the-line stance on short-term interest rates pushed bond rates up, causing long-term mortgage rates to rise. In the last three weeks, however, rates on 30-year mortgages have gone down.
Wednesday's report also showed that spending by the government on public works projects rose by a solid 0.6 percent in August to a rate of $217.3 billion, also the highest monthly level on record. Stronger spending on public housing, highways and streets, and health care buildings offset weaker spending on schools, transportation projects and recreational facilities.
Amid signs of an economic resurgence, the Federal Reserve last month decided to hold a main short-term interest rate at 1 percent, a 45-year low. Economists believe the Fed probably will leave that rate unchanged at its next meeting on Oct. 28.
The economy grew at a 3.3 percent rate in the second quarter of this year, and economists are predicting that it is now gaining even more momentum.
Many analysts believe the economy is growing at a rate in excess of 5 percent in the current quarter and should be able to maintain growth above 4 percent in the final three months of the year.
That forecast, if it proves to be correct, would represent the strongest back-to-back growth rates since the last two quarters of 1999.
Still, analysts caution that they have predicted second-half economic rebounds for three years that have failed to happen as consumers and companies grew cautious, concerned about their own financial situations as well as the economy's future.
