Construction Spending Up on Residential Surge

Washington, DC, Nov. 2, 2009--Construction spending in the U.S. unexpectedly rose in September as residential builders rushed to finish projects in anticipation of a possible end to the first- time home-buyers tax credit.

The 0.8 percent increase, the biggest since September 2008, followed a revised 0.1 percent drop in August that was previously reported as a 0.8 percent gain, Commerce Department figures showed.

Spending on residential and government projects climbed, while outlays on private commercial construction slumped for a fifth consecutive month.

Low borrowing costs, price declines and the government’s $8,000 tax credit for first-time buyers stabilized sales and spurred the biggest increase in residential construction in 26 years in the third quarter. Lawmakers are working on extending the credit, which may help support construction even as commercial real estate falters.

Economists forecast construction spending would fall 0.2 percent, after a previously-reported 0.8 percent gain in August.

Private residential construction spending increased 3.9 percent in September, the biggest gain since July 2003, after a 3.8 percent increase the month before. Compared with a year earlier, it was down 27 percent.

Non-residential construction, including public projects, decreased 0.4 percent.