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Construction Spending Continues to Slide in August

Having reach its apparent peak in June, construction spending continued its backward slide in August, the ""Census Bureau"":http://www.census.gov/ reported.

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The bureau estimated construction spending for the month at a seasonally adjusted annual rate of $837.1 billion, 0.6 percent down from the revised July estimate of $842.0 billion.

While August marks the second consecutive month of decreases, spending was still significantly up year-over-year, coming in at an estimated 6.5 percent above August 2011's annual rate of $786.3 billion.

Housing posted gains in both public and private construction spending, increasing month-over-month by 1.2 percent and 0.9 percent, respectively. Year-over-year, private residential spending jumped up 17.8 percent (led largely by new multi-family construction), while public residential spending dragged total public construction down with a 27.7 percent drop.

Numbers were more mixed in the nonresidential categories, with private construction reporting mostly month-to-month decreases. Public construction spending saw a few increases from July ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô mostly in the areas of commercial construction, public safety, and sewage and waste disposal ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô but private construction spending still posted bigger year-over-year gains, thanks largely to a 33.7 percent spending on lodging construction.

The news on construction spending follows a more positive release on a slight turnaround in the manufacturing sector. The ""Institute for Supply Management"":http://www.ism.ws/ismreport/mfgrob.cfm reported that after three months of contraction, manufacturing expanded in September.

While some may see that growth as a sign of a strengthening economy, some experts are cautioning against high hopes.

In a commentary on the day's news, ""Capital Economics"":http://www.capitaleconomics.com/ warned that September's manufacturing growth is unlikely to translate into major economic improvement, and although housing market continues to pull its weight, it can't shoulder the burden alone.

""The one silver lining was that the 0.9 percent month-over-month rise in private residential spending provides more evidence that the housing recovery is gathering pace,"" wrote Paul Dales, senior U.S. economist for Capital Economics. ""But even the housing sector is not large enough to set the overall economy alight.""

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