December Construction Spending Off .6%

Construction spending, held back by severe weather, fell 0.6% in December, reversing a November gain and ending 1989 with the lowest increase in seven years, the government reported today.

The Commerce Department said residential, non-residential and government construction spending totaled a seasonally adjusted annual rate of $414.6 billion in December, the lowest rate since last June’s 1% decline.

For the year, spending totaled $414.7 billion, up 1.2% from 1988. But the increase was the lowest since a 5.1% decline in the 1982 recession year. Spending increased 3% in 1988.

Residential spending was pushed down 0.7% in December by a 2.8% decline in multifamily construction. Single-family spending was up 0.4%. Residential spending represents about 50% of the total.

Non-residential spending was off 4.3% while government spending, which represents about 20% of the total, was up 2.9%, boosted by a 9.3% increase in highway and street expenditures.

The decrease in December spending offset a 0.7% advance in November, which followed a 0.4% decline in October. The November increase was revised downward from the 1.5% gain originally reported.

For the year, residential spending declined 1.1%, non-residential gained 2.4% and government spending was up 3.8%.

In addition to the effects of the unusually cold weather in December, construction was constrained throughout much of the year by high interest rates and fell to a yearly low of an annual rate of $410.3 billion last July.

But as the Fed appeared to succeed in driving down inflation, it permitted rates to fall gradually in recent months, and analysts have been saying the lower rates should result in increased construction.