Ahead of the Bell: US construction spending

US construction spending expected to show small gain in August

Associated Press
US construction spending down 0.8 percent
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In this photo made on Monday, Sept. 22, 2014, work continues at a construction site in Pittsburgh. The Commerce Department releases construction spending for August on Wednesday, Oct. 1, 2014. (AP Photo/Keith Srakocic)

WASHINGTON (AP) -- The Commerce Department reports on U.S. construction spending in August. The report will be issued at 10 a.m. EDT Wednesday.

SMALL GAIN: The expectation is that construction spending rose a modest 0.3 percent in August, according to a survey of economists by data firm FactSet.

STRONG REBOUND: In July, construction spending staged a strong rebound, rising by 1.8 percent, the biggest one-month gain in more than two years.

All major categories of construction showed gains in July, an encouraging sign that spending on building projects will help boost the economy in the second half of the year.

Economists were looking for a much smaller increase in August but they expected that a recovery in the housing market and gains in non-residential construction and government building would combine for a small total increase.

The overall economy went into reverse in the first three months of the year, shrinking at an annual rate of 2.1 percent, in part because of weakness in construction. Housing construction was contracting at a 5.3 percent rate in the first quarter, one of a number of sectors that were hurt by the unusually severe winter.

The economy rebounded in the April-June quarter, growing at an annual rate of 4.6 percent, the best showing in more than two years. Part of the rebound reflected a recovery in residential construction, which grew at an annual rate of 8.8 percent in the spring, the first positive growth after two quarters of declines.

The expectation is that construction continued growing in the July-September quarter and that provided support for the overall economy. Economists are forecasting growth of around 3 percent in the gross domestic product for the third quarter.

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