Construction Spending Unexpectedly Rebounds in August / Consumer Confidence Remains at Low of Year

Construction spending rose +.2% MoM in August (consensus -.3%) after falling a larger than originally reported -.5% MoM in July. The improvement was in non-residential construction of factories, hotels and offices (+1.6% MoM, +15% YoY) - with private non-residential construction rising to a six month high. Private residential construction fell for the 18th straight month, declining -1.5% MoM in August.

Over the past year, total construction spending has fallen -1.7% YoY due to the housing slowdown pulling down residential construction spending by -16% YoY. Non-residential construction has grown 14.7% YoY. Another source of growth over the past year has been government spending with has grown almost 15% YoY, with Federal spending rising +21.5% YoY and state and local growing +14% YoY.

In the second quarter, commercial construction grew 26%, the fastest rate since 1981, and continues to help offset the slump in the housing market. Forward looking indicators indicate that non-residential construction may begin slowing from the record levels of earlier this year. The Architectural Billings Index, which tracks building intentions over the next six to nine months, fell for the first time in six months in August as credit tightens for more industries. Residential building permits have been falling for a while.

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The University of Michigan Consumer Confidence Survey eased lower in the final September reading, falling to 83.4 from 83.8 to the lowest level in a year. Both current and future conditions eased slightly, and five year inflation expectations fell by a tenth to 2.9%.