U.S. construction spending rose unexpectedly in September, fueled by the biggest increase in housing construction in more than six years, the government reported Monday, providing hope that the troubled housing sector is starting to recover. The Commerce Department said construction spending rose 0.8 percent in September, much better than the 0.3 percent decline expected by economists. August construction activity was revised downward to show a 0.1 percent drop rather than the 0.8 percent gain first reported a month ago. The overall increase in construction spending reflected a 3.9 percent rise in spending on residential construction, the largest jump in housing activity since July 2003. Economists believe the residential sector is beginning to rebound and should help support an economic recovery. There are concerns, however, that much of the residential activity in recent months may have reflected a hurry by builders to begin projects that could qualify for an $8,000 tax credit offered by the government to first-time homebuyers. September's 3.9 percent increase in housing activity pushed spending in the category up to an annual rate of $255.97 billion, still 27 percent below the pace of a year ago. Total construction spending grew to an annual rate of $940.28 billion in September, the first increase following four consecutive monthly declines. Total construction spending is 13 percent below year-ago levels. The strength in housing was somewhat offset by a continuing slump in non-residential construction spending, which fell 1.8 percent in September to an annual rate of $357.9 billion, marking the fifth consecutive decline in the category. Spending declined for hotels, office buildings, and commercial developments, reflecting the difficulty in obtaining credit for commercial projects. Government construction spending rose 1.3 percent to a record high of $326.4 billion in September. Federal construction rose 0.7 percent, while state and local building activity rose 1.4 percent. Government construction is being supported by the $787 billion stimulus package approved by Congress in February. --SPA
