U.S. construction activity was unchanged in August despite the fact that spending for residential projects increased for the first time in 17 months amid the prolonged housing slump, the government reported Wednesday. The Commerce Department said construction activity was flat in August, a better-than-expected outcome than the 0.5 percent decline that economists had expected. Surprisingly, residential activity rose 0.3 percent, the first increase in housing construction since March 2007. It was only the second monthly increase in housing activity in the past 29 months, a period that has seen the industry battered by falling sales, declining prices, and soaring mortgage defaults. The wave of mortgage defaults also has hurt the financial industry, leaving banks holding billions of dollars in bad debt and triggering a severe credit crisis as they have become fearful of making new loans. Economists are worried that the severe lack of credit will cause banks to stop lending for commercial projects, further deepening the economy's problems. The 0.3 percent in residential construction left spending in the sector at an annual rate of $343.6 billion. That gain was offset by a 0.8 percent decline in spending on non-residential projects, which fell to an annual rate of $416 billion. Spending on government projects rose by 0.8 percent to a record-high annual rate of $312.5 billion.
