Construction Spending Up Unexpectedly
- Oct 04, 2011
Construction spending experienced a surprise 1.4 percent uptick in August, according to the U.S. Census Bureau on Monday. The rise was a mirror image of the 1.4 percent drop in July and more than economists had been expecting. In fact, it was the first positive reading in 2011.
One driver of the uptick was apartment construction. Even though single-family home construction is as weak as it’s ever been in modern times, when combined with multifamily housing construction in August, residential construction was up 0.7 percent. A move away from single-family housing now seems deep and more permanent that previously thought, so investors are now angling to get apartments out of the ground to meet the demand.
For the moment, however, a more important driver in construction is the building of schools, streets and waste disposal plants by various state and local governments. Since those levels of government are still suffering from serious revenue shortfalls, it’s unlikely that the money will be there to support a sustained burst of construction. August might be a pleasant fluke.
Manufacturing sector continues to grow
Economic activity in the manufacturing sector expanded in September for the 26th month in a row, notes the the latest Manufacturing ISM Report On Business, which was published on Monday. The Purchasing Managers Index registered at 51.6 percent, an increase of 1 percentage point from August, indicating expansion.
Twelve of the 18 manufacturing industries tracked by the Report on Business saw growth in September, including the likes of petroleum products, food and beverage, apparel, computers, plastics and chemicals. Among the industries that reported contraction in September were primary metals, fabricated metals, textiles and furniture.
Not bad overall, but still slower manufacturing activity than a peppy economy would produce. “Comments from respondents generally reflect concern over the sluggish economy, political and policy uncertainty in Washington, and forecasts of ongoing high unemployment that will continue to put pressure on demand for manufactured products,” noted Bradley J. Holcomb, chair of the Institute for Supply Management, in a statement.
More worries about Greek debt
Over the weekend, Greece said oops, the nation’s current “austerity budget” will still produce a deficit of 8.5 percent of 2011 GDP, rather than the 7.6 percent of the GDP that the EU and IMF had insisted upon as part of the Greek bailout. The Greek government added that it would miss next year’s target, too, racking up a deficit of 6.8 percent instead of 6.5 percent (though that does seem pretty close).
The next bailout payment is slated to be about 8 billion euros ($11 billion), and the Greek government needs it to keep paying many of its workers. Euro-zone finance ministers, who met on Monday to jawbone about the crisis, will meet again next week to decide whether to make that next bailout payment or perhaps risk setting off a euro-zone chain reaction that would panic investors everywhere else in the world.
In the meantime, Michael Fuchs, a deputy parliamentary floor leader in the current German ruling party, told a German newspaper that the Greek nation is, in fact, bankrupt, and that Greek debt holders will need to take a haircut in the neighborhood of 50 percent. And so the euro-debt drama—courtesy of the nation that invented drama—continues apace.
Wall Street was certainly a bit panicky on Monday, with the Dow Jones Industrial Average losing 258.08 points, or 2.36 percent. The S&P 500 was down 2.85 percent and the Nasdaq declined 3.29 percent.