Construction spending rises unexpectedly

August 3, 2009 7:21:53 AM PDT
Construction spending rose for the second time in three months in June as residential building increased, fresh evidence that the battered housing sector may be recovering. The Commerce Department said Monday that construction spending increased by a seasonally adjusted annual rate of 0.3 percent in June, defying analysts' estimates of a 0.5 percent drop. May construction spending was revised up to a 0.8 percent decline, from 0.9 percent.

Still, June's $965.7 billion in spending was 10.2 percent below the year-ago level.

A 0.5 percent rise in residential construction, which had fallen 3.1 percent in May after rising 1.5 percent in April, drove last month's overall increase. Public construction spending jumped 1 percent, the department said, the biggest increase since March.

Federal government construction spending increased 1.9 percent, the most since December 2008, after falling 0.3 percent in May and plummeting 6.1 percent in April.

The data follow reports from last month that new and existing home sales each rose in June, and new home construction also increased.

Construction spending was hammered by the housing and financial crises that plunged the economy into the longest recession since World War II.

Overall, the economy shrank at a 1 percent rate in the April-June quarter, the department said last week, a sharp improvement from the 6.4 percent contraction in the first quarter and a 5.4 percent decline in the fourth quarter of 2008. The gross domestic product, the broadest measure of the nation's output, has contracted for four consecutive quarters.

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