lorainscott's Journal: Unexpected Two-Month Decline in US Construction

Though construction spending had increased by up to 9 percent in the year ending in August, it fell in July and August, the Commerce Department reported. The decline is attributed to falling government and commercial projects. The 0.6 percent drop in August came as a surprise to economists who were calling for a 0.5 percent rise. Construction spending fell by 0.4 percent in July.

According to Bloomberg Businessweek, non-residential construction projects make up about 70 percent of all construction spending. This sector is being negatively affected by uncertainty surrounding the fiscal cliff and from government budget tightening.

Moodyâ(TM)s Analytics Inc., Senior Economist Ryan Sweet said, âoeConstruction is not going to be able to lead the recovery. Weâ(TM)re going to have to lean on other sources of growth.â

The drop in construction overshadowed housing gains, while private construction outlays rose the highest since January 2009 to $273.5 billion. Home-building numbers are staying at the highest levels seen since 2010, and are 27.7 percent higher than the year before, Fox Business reports.

Federal construction was up slightly to $25.21 billion, while state and local government spending decreased to $249.68

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