March Construction Spending Thaws Out : Economy: Meanwhile, a survey of purchasing managers shows stronger growth than economists had expected.

Spending on construction projects, held down the first two months of the year by unusually harsh winter weather, rebounded in March.

The Commerce Department reported Monday that construction spending rose 0.8% in March, with a jump in commercial work more than offsetting a drop in government construction. Spending on home building also rose, despite mortgage rates that have gone up since hitting a 25-year low last fall.

“Construction is going to do quite well. Banks have started to lend on commercial properties,” said Michael Sumichrast, a Washington-based real estate economist. “Commercial building has been slow, but there is gradual improvement.”

Economists said that while the March recovery was weaker than expected, a bigger gain is likely during the second quarter of the year. Many analysts had predicted a 2% rise in construction spending.

In another report, the National Assn. of Purchasing Management, a trade group of buyers for the nation’s factories, said American manufacturing strengthened in April for the eighth straight month.

The widely followed economic survey was stronger than expected and suggested the overall economy is becoming more robust. The purchasing managers’ index rose to 57.7%, compared to 56.7% in March. A reading above 50% indicates an expanding manufacturing economy.

The Commerce Department said residential, non-residential and government construction spending rose to a seasonally adjusted annual rate of $495.4 billion in March, up from $491.7 billion in February.

Spending was down 1% in February and 2.3% in January after increasing for each of the previous eight months.

In March, government spending declined 2.7%, to $126.9 billion, after slipping 0.3% in February.

Spending on home building rose 1.5% in March, to $234.4 billion, after increasing 0.3% in February and 0.4% in January. With revised figures for January--which previously had shown the category unchanged--residential construction has increased 11 straight months.

Thirty-year, fixed-rate mortgages averaged 8.32% last week, according to the Federal Home Loan Mortgage Corp.

Spending on apartment buildings was up 1.8% in March, the third straight increase. Multifamily construction generally has lagged in recent years because of vacancies in many areas of the nation.

Non-residential spending rebounded sharply in March, rising 3.8% to $92.7 billion after a 5.1% drop in February. Leading the way was spending on commercial property, such as shopping centers, which rose 5.8%, and office buildings, which increased 9.1% after dropping 5.3% in February.

Construction Spending

In billions of dollars, seasonally adjusted: $495.4, March 1994 Source: U.S. Dept of Commerce

Purchasing Managers’ Index

The pruchasing managers’ index tracks overall business activity of more than 300 industrial companies: 57.7%, April 1994. Source: National Assn. of Purchasing Management