Total Spending for Construction Off 1.2% in March

The Commerce Department reported Thursday that construction spending fell 1.2% in March, the biggest decline in more than a year, as housing activity edged down slightly and industrial building took a much steeper plunge.

The department said new construction in March totaled $354.6 billion at a seasonally adjusted annual rate, down $4.3 billion from the February level, when spending had risen by 1.1%. It was the largest drop since a 2% decline in February, 1985.

The decline was led by an 11.7% fall in construction spending on factories and other industrial projects, which dropped to an annual rate of $14.4 billion.

General Weakness in Most Categories

There was general weakness in most other categories as well. Residential construction slipped 0.5% to an annual rate of $154.3 billion as a 3% rise in multifamily construction was offset by a 1% drop in the larger category of single-family homes.

Michael Sumichrast, chief economist for the National Assn. of Home Builders, said the new report was not correctly reflecting the current housing boom. He said construction spending in the single-family area would start to show sizable gains in coming months.

Despite strength in the single-family area, Sumichrast predicted that overall construction spending would rise by only 5.3% this year, about half the 1985 increase. He said the slowdown in growth would occur because of weakness in the construction of offices and apartments.

“We think we will see at least a 10% decline in office buildings. There is heavy overbuilding in this area,” Sumichrast said.

In March, non-residential construction fell 2.2% to a seasonally adjusted annual rate of $90.4 billion.

Government construction spending fell 0.9% to an annual rate of $68.1 billion. The $354.6-billion overall construction rate was up 6% from a year ago, before adjusting for inflation. The biggest change came in the government category, where spending was up 15.2% over last year.