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Business Title: Construction Spending in U.S. Declined Twice as Much as Forecast in July ("Unexpectedly") Construction Spending in U.S. Declined Twice as Much as Forecast in July By Shobhana Chandra - Sep 1, 2010 9:00 AM CT Construction spending in July fell twice as much as forecast, led by a slump in homebuilding that will depress U.S. economic growth. The 1 percent drop brought spending to $805.2 billion, the lowest level in a decade, after a revised 0.8 percent drop in June that wiped out a previously estimated gain, Commerce Department figures showed today in Washington. Spending on federal government projects fell by the most in a year. Builders are facing a slump in demand following the end of a homebuyer tax credit, even with mortgage rates at a record low, while mounting foreclosures will add to the inventory and further restrain prices. Government construction spending is also likely to stay weak as stimulus-linked outlays wane and state budgets shrink. “Housing is fairly weak and construction related to the stimulus is fading,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Some commercial projects may have been delayed as businesses are uncertain about the outlook.” Economists forecast construction spending would fall 0.5 percent after a previously estimated gain of 0.1 percent in June, according to the median of 50 projections in a Bloomberg News survey. Estimates ranged from a drop of 1.6 percent to a 0.5 percent increase. Construction spending was down 11 percent in the year ended in July. Residential Slump Private construction spending decreased 0.8 percent as homebuilding outlays dropped 2.6 percent. Private non-residential projects increased 0.8 percent, led by power and communications facilities. Spending on public construction fell 1.2 percent from the prior month. Federal construction spending decreased 6.5 percent, the most since August 20009, after rising 4.5 percent in the prior month. Builders broke ground on fewer homes than forecast in July and building permits fell to the lowest level in more than a year, indicating little evidence of a rebound in construction following an expired tax credit, the Commerce Department reported last month. The homebuyers tax credit required purchasers to sign a contract by April 30 and close the transaction by June 30. While the deadline for completion has been moved to September 30, there was a rush to close ahead of the initial expiration date. Plunging Sales Demand is retreating even with cheaper prices and lower borrowing costs. Sales of new homes fell 12 percent in July to the lowest level since records began in 1963, data from the Commerce Department showed. Sales of existing homes plunged 27 percent to the slowest annual pace in records dating to 1999, the National Association of Realtors reported. Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its first quarterly profit since 2007 after a tax benefit and drop in writedowns. The acceleration in deposits and traffic through the first few weeks of May was not sustained the rest of the quarter that ended July 31, Horsham, Pennsylvania- based Toll said. Demand “has continued to be very bumpy and relatively slow,” Chief Executive Officer Douglas Yearley said on a conference call with analysts and investors on Aug. 25. “We don’t blame our buyers, they’re skittish.” The economy expanded at a 1.6 percent annual rate in the second quarter, less than the 2.4 percent previously calculated, Commerce Department figures showed last month. Today’s construction-spending revisions indicate growth will come in even weaker when the figures are updated later this month. Spending on structures, including office buildings and factories, rose at a 0.4 percent pace last quarter, while homebuilding climbed at a 27 percent rate. State and local governments are under pressure to cut spending. Newark, New Jersey’s largest city, may bridge an $83 million budget gap by selling police stations and municipal buildings to an Essex County agency and leasing them back, Mayor Cory Booker’s administration said last week. To move forward, the plan must be passed by Newark’s Municipal Council. Poster's Comment: I wonder what effect this will have on Unemployment??? So confusing here!
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#1. To: All (#0)
Down 11% year over year. And July of 2009 was a very bad year.
#2. To: Nebuchadnezzar (#1)
The Top 50 000. Index Value: 10,250.66 Trade Time: 11:11AM EDT Change: Up 235.94 (2.36%) And only the Top 1% own stocks.
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