March 3, 2010

January Construction Spending Slides

WASHINGTON — Construction spending fell for a third straight month in January as a lag in commercial activity such as office buildings and hotels offset a housing rebound.

The trouble that builders are facing will likely weigh on overall economic activity in coming months.

The Commerce Department said Monday that construction spending dropped 0.6 percent in January, a decline that was slightly smaller than the 0.7 percent drop that economists had expected.

Housing construction rose 1.3 percent, although that gain could be temporary given the weakness seen in sales of both new and existing homes in January. Spending on nonresidential projects fell by 2.1 percent.

With the third monthly decline, construction spending in January stood at a seasonally adjusted annual rate of $884.12 billion, down 11.5 percent from a year ago.

The construction is expected to remain under pressure for months to come as home builders struggle to mount a sustained comeback from the steepest slump in decades. Banks, with mounting loan problems in commercial real estate, have tightened lending standards.

Even with a 1.3 percent rise in private residential construction, activity in the sector was still down by 6.4 percent from a year ago at a seasonally adjusted annual rate of $260.85 billion. Doubts about a sustained housing recovery grew following reports last week that sales of new homes plunged 11.2 percent to a record low in January, while sales of existing homes fell 7.2 percent to their slowest pace since last summer.

The 2.1 percent fall in spending for nonresidential projects marked the 10th straight decline and pushed activity in the sector down to an annual rate of $316.42 billion, 19.9 percent below a year ago.

For January, construction of hotels, office buildings and shopping centers all declined with all three categories down by more than 30 percent from their levels of a year ago.

Spending for government projects dipped by 0.7 percent to a rate of $306.86 billion, the sixth consecutive monthly decrease, reflecting the squeeze that the deep recession has put on state and local governments.
Spending on state and local projects fell by 0.9 percent while spending on federal building projects rose by 1.9 percent.

Source: Associated Press, March 2, 2010



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