Construction Outlays Climb 0.4% in Month

Construction spending edged up 0.4% in April as weakness in government and residential projects was offset by gains in construction of shopping centers and factories, the Commerce Department reported Monday.

The department said private and public construction was being built at a seasonally adjusted annual rate of $384.1 billion in April, following a revised 1.1% March decline.

The April increase was the strongest since a 1.5% rise in February, but it still left construction activity only 2.7% higher than it was a year ago.

This is consistent with economic forecasts predicting that the construction industry will act as a drag on overall economic growth this year because of the adverse effects of the new tax law and widespread overbuilding of apartments and office buildings.

Cynthia Latta, an economist with Data Resources of Lexington, Mass., predicted that both residential and non-residential construction would decline for most of the year, with this sluggishness holding back overall economic growth.

“We don’t see any pickup in building activity even in 1988 in the non-residential area because there is a lot of overbuilding,” she said.

Commercial Construction Up

For April, residential construction edged down 1% to an annual rate of $184.2 billion. Single-family construction rose 0.4% to an annual rate of $113.1 billion but this was offset by a 1% drop in multifamily dwellings, which were built at an annual rate of just $28.3 billion.

Non-residential construction rose 1% to an annual rate of $88 billion in April. The strength came from a 7.6% jump in building of shopping centers and similar commercial projects and a 0.9% rise in construction of industrial factories.

However, these gains were offset somewhat by a 4.2% drop in construction of office buildings, which are now 20% below the level of a year ago, and a 2.6% decline in construction of hotels and motels.

Building of government construction projects fell 0.3% in April to an annual rate of $76.2 billion. The biggest category of public construction, highway spending, was off 3.7% although analysts forecast this category would show healthy gains as the summer construction season gets under way.

In a separate survey, a construction information group said contracting for new building projects in April showed little change from March’s strong showing.

The F. W. Dodge division of McGraw-Hill Information Systems Co. said April contracting slipped just 1% to a total of $247.6 billion on an annual basis.

The Dodge report said stability prevailed in all three broad categories of construction covered by the survey.