Ahead of the Bell: Construction spending

WASHINGTON (AP) — Construction spending likely retreated in September following a housing-fueled rise in August. A slip in building activity would underscore the fragile nature of the housing recovery, which analysts hope will provide support for the overall economy in the months ahead.

Economists surveyed by Thomson Reuters expect construction spending fell 0.3 percent after rising 0.8 percent in August. The Commerce Department is scheduled to release the report at 8:30 a.m. EST Monday.

The August construction increase came after three straight months of declines. It reflected a 4.7 percent rise in private residential activity, the biggest one-month increase since November 1993.

That surge was spurred partly by builders rushing to ramp up construction to take advantage of a first-time homebuyers tax credit of up to $8,000 scheduled to expire on Nov. 30.

Senators agreed last week to extend the tax credit for potential buyers who have sales agreements signed by the end of April. Those buyers would have until the end of June to close on their new homes. The proposed extension must be approved by the Senate and the House to become law.

The housing industry had lobbied for the extension, arguing that a tentative rebound from aprolonged slump in housing could be derailed without it.

The strength in housing in August helped offset weakness in nonresidential construction, which posted a fourth consecutive decline. This sector is being hurt by a credit squeeze as banks, struggling through the worst financial crisis since the 1930s, have tightened up on loan standards in reaction to soaring mortgage defaults in the commercial sector.

Homebuilder Ryland Group Inc. reported last week that its third-quarter loss narrowed on smaller losses on its home construction business. NVR Inc., a homebuilding and mortgage company, said its profits doubled in the third quarter, helped by a 13 percent rise in new home orders.

The housing sector is struggling to emerge from the worst slump in years, a period of falling sales and prices following a housing boom earlier in the decade.