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Tue November 07, 2000 - Northeast Edition
Construction spending jumped 2.4% in Sept., the biggest gain in 10 months, led by strong increases in spending for home remodeling, office buildings and government projects.
The Commerce Department said the increase, which followed a hefty 1.8% gain in August, pushed spending to a seasonally adjusted annual rate of $819.3 billion, the second highest level on record.
The increase was more than four times the 0.5% gain that economists had been predicting and should add to the debate over how much the economy is actually slowing.
Another report Wednesday showed that economic growth, at least in the manufacturing sector, is continuing to slow. The National Association of Purchasing Managers said its purchasing index fell to 48.3% in Oct., indicating that manufacturing activity contracted for a third straight month.
A reading above 50% on the purchasing managers’ index indicates growth in manufacturing while anything below that level indicates a slowdown.
The stock market rallied in recent days, bolstered by a belief that the economy is slowing to a more moderate pace that will keep inflation under control and alleviate the need for the Federal Reserve to push interest rates any higher. But in early afternoon trading Wednesday, the Dow Jones industrial average was down 57 points.
The state of the economy is also an issue in the presidential race, with Vice President Al Gore urging voters to keep Democrats in the White House as a way to ensure that the record 9-year-long economic expansion continues.
Republican George W. Bush argues that his across-the-board $1.3 trillion tax cut is needed as an insurance policy to spur the economy if growth suddenly falters.
The government reported recently that the economy grew at an annual rate of 2.7% in the July-September quarter, less than half the 5.6% growth rate of the second quarter.
However, the government said Monday that consumer spending in September surged by 0.8%, the biggest increase since February, as the economy continues to send conflicting signals about how much of a cooling is occurring.
Analysts still believe Fed policy-makers will leave rates unchanged when they next meet on Nov. 15 but some think that rates could still go higher next year if there are signs the third quarter slowdown was only temporary.
The 2.4% rise in construction spending in Sept. was the biggest increase since a 2.6% gain in November 1999.
The Sept. increase reflected a 2.1% rise in private construction, which was led by a 3.4% surge in nonresidential activity. Office building soared by 6.2% and gains also occurred in construction of factories, hotels and hospitals.
Residential activity rose by 1.1% with all the strength coming from a sharp 6.4% rise in home remodeling. Construction of single-family homes and apartments was actually down in September.
Government building projects posted a 3.5% increase with school construction up 5.3%.