Construction Spending Rose 0.3% in August; ISM Index Dropped 1.6%

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during August 2006 was estimated at a seasonally adjusted annual rate of $1,200.7 billion, 0.3% above the revised July estimate of $1,196.8 billion. The August figure is 4.4% above the August 2005 estimate of $1,150.3 billion.

During the first 8 months of this year, construction spending amounted to $793.2 billion, 7.2% above the $739.9 billion for the same period in 2005.

Spending on private construction was at a seasonally adjusted annual rate of $929.1 billion, 0.1 percent above the revised July estimate. Residential construction was at a seasonally adjusted annual rate of $617.0 billion in August, 1.5% below the revised July estimate of $626.2 billion. 

In August, the estimated seasonally adjusted annual rate of public construction spending was $271.6 billion, 1.1% above the revised July estimate of $268.8 billion. Educational construction was at a seasonally adjusted annual rate of $70.7 billion, 0.7 percent above the revised July estimate of $70.2 billion. Highway construction was at a seasonally adjusted annual rate of $77.9 billion, 0.4 percent above the revised July estimate of $77.6 billion.

ISM Index (PMI):

The ISM's PMI indicates that the manufacturing economy grew in September for the 40th consecutive month as it registered 52.9%, a decrease of 1.6% points when compared to August's reading of 54.5%. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The September PMI indicates that both the overall economy and the manufacturing sector are growing at a slower rate. The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (54.9 percent) corresponds to a 4.4% increase in real gross domestic product (GDP). In addition, if the PMI for September (52.9 percent) is annualized, it corresponds to a 3.7% increase in real GDP annually.

ISM's New Orders Index registered 54.2 percent in September. The index is the same as reported in August. ISM's Production Index registered 56.1 percent in September, 0.5 percentage point lower than the 56.6 percent reported in August. ISM's Employment Index registered 49.4 percent in September, a decrease of 4.6 percentage points when compared to August's reading of 54 percent. This contraction follows two consecutive months of growth in employment.

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