Construction Outlays Rise 1.2% in Month : Factory Orders in Steepest Fall in 1 1/2 Years

Orders to U.S. factories, after increasing for three consecutive months, dropped 1.4% in February for the largest decline in 1 1/2 years, the Commerce Department reported Tuesday.

The February weakness was largely caused by a 30% drop in new orders for defense equipment.

Excluding the military category, factory orders would have risen a modest 0.2% in February.

February orders totaled a seasonally adjusted $198.6 billion in February, down from $201.4 billion in January, the department said. It was the largest one-month drop since a 1.6% decline in September, 1984.

In a second economic report, the Commerce Department said construction spending rose a seasonally adjusted 1.2% in February, with most of the increase led by a 2.1% pickup in residential construction that offset a 1.9% dip in government construction.

Analysts said the two reports generally showed continued signs of sluggishness across most sectors of the economy except housing.

“You have to conclude that the economy is still in a very slow-growth mode,” said Lawrence Chimerine, president of Chase Econometrics. “The manufacturing sector is improving marginally at best. Orders go up a little bit, then down a little bit.”

New construction totaled a seasonally adjusted $360.5 billion at an annual rate in February, up from $356.1 billion in January, the third consecutive monthly increase, the Commerce Department said.

Construction of new single-family homes rose 2.4% from January to an annual rate of $91.3 billion. That is 12.9% higher than the level of February, 1985. Construction of multifamily homes rose 3.7% in February to an annual rate of $31 billion, up 5.4% from the year-earlier level.

“We’re helping the overall construction figures quite a bit,” said Michael Sumichrast, chief economist for the National Assn. of Home Builders. “There’s not much going on in the public sector.”

However, even though more new homes are being built, their sales are lagging behind their construction.

The Commerce Department reported Monday that new home sales fell 3.8% in February, despite some of the most attractive mortgage interest rates in years. Housing industry officials said they expected to see a surge in home buying in the coming months.

Construction of office buildings showed only a slight 0.3% increase from January, although industrial construction was up 10.6%--an increase that followed a December-January decline of almost the same magnitude.

Construction of shopping centers and other commercial buildings increased 1% in February.

Meanwhile, governmental construction dropped 1.8% in February to $39.3 billion despite a 1% increase in the largest category, highways and streets, to $12.8 billion.

In the report on factory orders, the durable goods category--items expected to last three or more years--declined 1.2% to $107.2 billion in February, the Commerce Department said.

The biggest decline was a 19.2% drop in orders for aircraft, missiles and related parts. Machinery used for construction and mining fell by 5.3%--another indication of the slowdown in energy-related industries caused by collapsing world oil prices.

Computer Orders Up

These declines were partially offset by more than a 100% increase in orders for U.S.-made computers and other office equipment to $4.9 billion in February from $2.3 billion in January. The surge followed two consecutive months of sharp declines.