Construction Spending Rises 0.9% in Month

Construction spending rose a modest 0.9% in January as a healthy gain in home and apartment building offset weakness in factory construction, the Commerce Department said Monday.

Spending on construction had risen by 2.6% in December, compared to the previous month. In dollar terms, construction spending in January totaled $357.3 billion at a seasonally adjusted annual rate.

Construction of homes and apartments climbed 1% to an annual rate of $152.8 billion, while non-residential building fell 1%.

Michael Sumichrast, chief economist for the National Assn. of Home Builders, said that, while he expects strength in some areas of construction in the coming year, he looks for growth to be sharply lower than last year.

Lower Growth Forecast for ’86

Construction spending rose by 9.5% in 1985, but Sumichrast said he was forecasting growth this year of just 5.3%. After taking inflation into account, this will mean very little change from last year, he said.

“Construction will have a reasonably good year but not a strong year,” he said. “We are clearly seeing a peak in office buildings, which are way overbuilt.”

Sumichrast predicted that office building activity would fall by almost 10% this year and that apartment construction would drop an even sharper 19%, reflecting uncertainty over congressional action on a new tax bill.

He forecast that government construction spending would rise by almost 13%, with much of the increase coming in highway construction.

The Commerce Department report said the 1% January increase in residential construction included a 3% jump in construction of single-family homes and a 2% rise in multifamily construction.