March 4, 2010

U.S. construction spending down, non-residential falls for tenth month

Hotels, office buildings, malls off 30 per cent year-over-year

WASHINGTON, D.C.

Construction spending in the U.S. 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 construction spending dropped 0.6 per cent in January, a decline that was slightly smaller than the 0.7 per cent drop that economists had expected.

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

The 2.1 per cent fall in spending for non-residential projects marked the tenth straight decline and pushed activity in the sector down to an annual rate of $316.42 billion, 19.9 per cent 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 per cent from levels of a year ago.

Spending for government projects dipped by 0.7 per cent 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 per cent while spending on federal building projects rose by 1.9 per cent.

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

The construction sector 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 per cent rise in private residential construction, activity in the sector was still down by 6.4 per cent 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 per cent to a record low in January, while sales of existing homes fell 7.2 per cent to their slowest pace since last summer.

Associated Press

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