Mixed Economic Signals

The Commerce Department said construction spending slipped 0.4% in February as the hard-hit commercial real estate sector pulled the entire industry down. The value of new residential, non-residential and government projects totaled a seasonally adjusted annual rate of $406.2 billion, down from $407.9 billion a month earlier.

But the National Assn. of Purchasing Management’s index, a keenly watched harbinger of the nation’s industrial activity, rose to 54.1% in March--its highest level in six months--from 52.4% in February. Good signs: Spending on single-family homes, the biggest component of the residential sector and the linchpin of a recovery, picked up for the 13th straight month. New single-family home building reached an annual rate of $110.2 billion in February, up from $106.8 billion. Government spending rose 0.3%, to $113.6 billion, with an 8.5% gain in outlays for streets and highways.

The purchasers’ index showed a sharp rise in new orders--62.4% for March from 57.5% in February. High new orders signal economic growth for the next few months, the group said. Production grew in March for the 10th consecutive month, with the index rising to 60.1% in March from 58.6% in February. “The growth in new orders appears stronger and should contribute to increased growth in production. . . . Hopefully, this will lead to a more sustainable recovery than in 1991,” said Robert Bretz, chairman of the purchaser’s survey committee and purchasing director at Pitney Bowes Inc.

Bad signs: Commercial properties continue to suffer from vast overbuilding and high vacancy rates. Spending on industrial and office buildings fell for the 10th straight month, to $84.9 billion in February from $86.4 billion in January.

Construction Spending Billions of dollars, seasonally adjusted Feb., ‘92: 406.2 Jan., ‘92: 407.9 Feb., ‘91: 41.1 Source: Commerce Department