updated 10/3/2005 10:39:55 AM ET 2005-10-03T14:39:55

Construction spending in the United States climbed to a record high in August, helped by a renewed boom in housing. Even bigger gains are expected in coming months, spurred by the massive rebuilding required in the wake of hurricanes Katrina and Rita.

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The Commerce Department said Monday that total August spending rose by 0.4 percent, the biggest increase in three months. It pushed building activity to an all-time high of $1.11 trillion (euro930 billion) at a seasonally adjusted annual rate.

The increase did not include any hurricane-related activity because Katrina did not strike until late in August. But the government said all the spending on the rebuilding of homes and businesses in coming months will add to the construction figures.

The 0.4 percent increase in construction spending matched the May gain. Spending had risen 0.3 percent in July and fallen by 0.5 percent in June.

Private residential construction posted a 0.2 percent increase in August to $614.6 billion (euro515 billion) after having shown no gain in July and posting a sizable 0.4 percent drop in June.

Analysts had been expecting home building to cool a bit as mortgage rates continue to rise. The rate for 30-year mortgages hit a five-month high of 5.91 percent last week, according to Freddie Mac's nationwide survey.

Analysts believe that sales of both new and existing homes will set records this year for a fifth straight year but they are forecasting a slight decline in sales activity in 2006 based on expectations that mortgage rates will continue to climb.

The slowdown in building activity will be offset somewhat by the need to rebuild homes in the Gulf Coast states of Louisiana, Mississippi, Alabama and Texas.

The government said that all rebuilding will be counted in the construction total although those figures will not include costs for clean-up or demolition of damaged homes.

Total private construction rose by 0.4 percent to an annual rate of $858.4 billion (euro719 billion) in August, a figure that included the 0.2 percent rise in residential construction and an increase of 0.8 percent in private non-residential building, which climbed to a rate of $243.8 billion (euro204 billion) in August. That increase reflected big gains in construction of hotels and shopping malls, which offset a drop in construction of office buildings.

Total government construction rose by 0.5 percent to an annual rate of $250.2 billion (euro210 billion), a record high. This gain reflected strength in state and local building projects, which rose 0.7 percent to a record annual rate of $232.7 billion (euro195 billion). This helped to offset a 2.3 percent drop in federal building projects, which declined to $17.5 billion (euro14.7 billion).

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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