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Constructing a Recovery in Home Building?

by Chicago Agent

Construction spending rose impressively in August, but does that mean a recovery is coming?

Construction spending rose 1.4 percent in August, a strong recovery after a disappointing 1.4 percent decline in July.

According to data from the U.S. Commerce Department, building in August reached a seasonally adjusted annual rate of $799.1 billion, a 4.8 percent increase over March and 0.9 percent increase from August 2010. The latter stat represents the first year-over-year gain in four years.

Even with the positive data, though, concerns persist over the nature of the gains. Private construction in August rose just 0.4 percent, with residential building up 0.7 percent.

John Ryding, an economist with RDQ Economics, said public projects propelled August’s gains, and that spending will not continue throughout the year; state and city governments are expected to cut their infrastructure projects to balance budgets.

“The pickup in the pace of spending was … not a sign of revival in private demand,” Ryding said.

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