Thursday, March 1, 2007

Construction Spending Drops .8%

From Bloomberg:

Construction spending in the U.S. fell by the most in three months in January, pulled lower by the biggest decline in homebuilding since July.

Spending on residential and non-residential projects dropped 0.8 percent after a revised 0.6 percent increase in December, the Commerce Department said today in Washington. The government previously estimated a drop in December spending.

Homebuilders are reluctant to start work on new projects as buyers cancel contracts and inventories of unsold homes swell. A report yesterday showing new-home sales fell by the most in 13 years suggests that construction will continue to falter, weighing on economic growth.

``Residential construction spending has been steadily declining since spring 2006, and we expect this trend to continue,'' Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York, said before the report.

Here's a link to the Census report

Residential construction dropped 1.7%. Considering the housing numbers we are seeing right now, this is to be expected. However, nonresidential construction increased .2%. Residential and nonresidential are each roughly 50% of the construction numbers. Lodging increased 3.2% and office construction increased 3.1%. Transportation and communication were also up.

Right now, business construction is helping to lessen the negative impact of the residential decline. The real question is will this trend continue.