Offices, Schools Gain 1% in Building Spending

Construction spending, aided by a sharp jump in office building and school construction, rose 1.0% in February for the first advance since last October, the government reported recently.

The Commerce Department said private and government construction projects were being built at a seasonally adjusted annual rate of $378.4 billion in February, after a 1.0% decline in January.

Analysts said the increase was essentially a rebound after three consecutive monthly declines. They said it did not alter their general feeling that construction spending, which was one of the strongest sectors of the economy in 1986, will be much weaker this year.

“We are going to have very slow growth for construction in general,” said Doug Handler, chief forecaster for Wharton Econometrics of Philadelphia. “We have got some horrible disincentives from tax reform; and also for certain areas, such as office buildings, there is a glut of space on the market.”

Handler said that given the current high office vacancy rates, it was puzzling to see a big 6.6% jump in office construction activity in February. Other analysts suggested that it might be a last gasp of activity by developers trying to get projects started when interest rates were still low.