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Construction spending ekes out slight gain in September

By Martin Crutsinger
AP Economics Writer

Washington — A mixed picture of the economy emerged one day before key midterm elections that have focused on the nation’s financial health.

Spending by Americans slowed in September and their incomes fell for the first time in more than a year. At the same time, manufacturing activity grew by the most in five months and the weak construction industry showed a little life.

The new data suggest the economy is growing, albeit at an anemic pace.

“It is encouraging that economic growth no longer appears to be slowing. Nonetheless, the economy is not growing fast enough to reduce the unemployment rate or boost inflation,” said Paul Dales, U.S. economist with Capital Economics.

Consumer spending rose at an annual rate of 0.2 percent in September, the Commerce Department reported Monday. That’s below the 0.5 percent gains recorded in July and August.

Incomes fell 0.1 percent in September, following a 0.4 percent rise in August that had been pushed higher by the return of extended unemployment benefits.

A separate report showed manufacturing activity expanded last month at the fastest pace since May — the 15th straight month for growth. The Institute for Supply Management reported its manufacturing index was 56.9 in October, up from 54.4 in September. A reading above 50 indicates growth.

And the struggling construction industry posted small gains in September, buoyed by increases in government projects and residential spending. The Commerce Department reported spending on building projects rose 0.5 percent after falling in August to the lowest point since July 2000.

Even with the small September gain, construction activity remains 34 percent below the peak hit in 2006 when builders were enjoying a boom in residential housing. That boom turned into a bust that helped drag the country into a severe recession.

In September, total spending edged up to $801.7 billion at a seasonally adjusted annual rate, compared with spending of $1.21 trillion at an annual rate in March 2006 at the peak of the housing boom.

Residential activity rose 1.8 percent to an annual rate of $231.7 billion in September, the first gain after four straight declines. That weakness reflected the end of a popular government tax credit for homebuyers that had spurred construction before it ended in April.

Private nonresidential building projects posted a decline of 1.6 percent to an annual rate of $250.3 billion in September after a 0.8 percent rise in August. The August increase had followed four straight monthly declines in this category, reflecting the deep recession and the trouble builders are having in obtaining financing for shopping centers and other commercial projects.

Spending on government projects rose 1.3 percent to an annual rate of $319.7 billion. That reflected a 6.1 percent jump in federal spending and a more modest 0.8 percent rise in spending by state and local governments.

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