Construction spending set another record in September as the building industry continued to enjoy boom times.
The Commerce Department said construction activity rose 0.5 percent to an all-time high of $1.12 trillion at a seasonally adjusted annual rate in September as builders took advantage of interest rates that are still low by historical standards.
However, analysts believe that activity is likely to slow in coming months as the Federal Reserve keeps pushing interest rates higher to combat inflation pressures stemming from the spike in energy prices that occurred following the hurricane-related energy production shutdowns along the Gulf Coast.
Private economists believe the hurricanes and the related jump in energy prices will reduce as much as a full percentage point from growth in the second half of this year.
The government reported Friday that the overall economy expanded at an annual rate of 3.8 percent in the July-September quarter. But analysts said growth would have been well above 4 percent without the drag caused by the hurricanes, which have cost more than a half-million jobs.
The 0.5 percent increase in construction spending in September followed strong gains of 0.6 percent in both August and July.
Analysts believe that construction activity will get a boost from the massive rebuilding required after a string of devastating hurricanes but they don’t think this activity will be enough to offset a slowdown in the rest of the country triggered by rising interest rates.
Home mortgage rates have broken through the 6 percent level and analysts believe they will keep heading higher in coming months.
Private construction rose by 0.6 percent to a seasonally adjusted annual rate of $871.5 billion with private residential building up an even stronger 1 percent, to $624.3 billion. Both the overall private construction figure and the residential activity were at all-time highs.
Both office construction and commercial buildings, a category that includes shopping centers, showed big gains in September.
Total government construction was unchanged in September at an annual rate of $248.5 billion after posting a 0.4 percent increase in August. Activity at the state and local level rose by 0.3 percent to a record high of $231.9 billion while federal building projects dipped by 4.5 percent to an annual rate of $16.7 billion.