Construction spending posts small increase

updated 10:31 a.m. ET Sept. 28, 2007

WASHINGTON - Construction spending posted a bigger-than-expected 0.2 percent gain in August as strength in non-residential construction offset a continued plunge in home building.

The Commerce Department said Friday that the August increase pushed total construction spending to a seasonally adjusted annual rate of $1.166 trillion.

The gain reflected a 2.3 percent rise in spending on office buildings, shopping centers and other non-residential projects. That was the biggest increase in this category in six months.

Spending on home building fell by 1.5 percent, the 18th straight drop in this area, with more weakness expected in coming months as builders scramble to cut back production in the face of slumping sales and a record number of unsold homes.

Analysts had been forecasting that the weakness in home building would be enough to pull down overall activity by about 0.2 percent. According to revised estimates, construction spending fell by 0.5 percent in July and 0.1 percent in June.

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