Construction Outlays Jump 1.8% in January

Construction spending rose 1.8% in January, the biggest increase in more than a year, the government said Thursday. Analysts said the warmest January on record caused the improvement.

The Commerce Department said residential, non-residential and government construction spending totaled a seasonally adjusted annual rate of $424 billion in January. The gain was the largest since a 2.3% advance in December, 1988.

The January increase came after a 0.1% decline in December.

It was the warmest January since the government began keeping track of temperatures 96 years ago, while December was the fourth coldest on record.

“If you average January and December, you come up with a number more in line with what we saw in the previous four months,” said David Berson, chief economist with the Federal National Mortgage Assn.

“December was not as bad as it appeared and January is not as good as it appears,” he said.

Berson said lower mortgage interest rates should produce a slight improvement in the months ahead.

Spending on residential building was up 2.9% to $195.8 billion on an annual rate in January, largely because of a 2.4% gain in single-family homes. Multifamily spending was flat at $20.4 billion. Residential spending accounts for about 50% of the total.

Non-residential construction spending was up 5.9% to an annual rate of $100.8 billion, boosted in part by a 15% gain in the industrial category.

The often-volatile government sector, however, declined 4.2% to $490.9 billion after rising 6.8% in December. Government spending represents about 20% of construction spending.

Leading the fall in that sector was a 13% decline in spending on highways and streets.

CONSTRUCTION SPENDING Billions of dollars, seasonally adjusted Jan., ‘90: 424.0 Dec., ‘89: 414.6 Jan., ‘89: 424.8 Source: Commerce Department