Construction spending rises, fueled by gains in home building

A new house is under construction by KB Home in Santa Clarita.
(Anne Cusack / Los Angeles Times)

WASHINGTON -- In another boost for the economy, construction spending picked up in February as home builders moved to address the growing demand and shortage of supply in the housing market.

The value of public construction also rose in February from the prior month, offering hopeful signs that state and local government spending may be stabilizing even as federal budget cuts start to take hold.


Overall, private and public construction spending rose 1.2% in February from the prior month, to a seasonally adjusted annual rate of $885.1 billion, the Commerce Department reported Monday. That’s slightly better than what most analysts had forecast, and it came after a 2.1% drop in January.

Private construction spending increased 1.3% in February, to $613 billion. That’s up 12.6% from a year ago but far below the pre-recession level in excess of $900 billion.

Builders are now racing to put up more homes in light of rising home prices and the dwindling inventory of properties for sale. Spending for private residential construction, on the strength of single-family homes, reached an annual rate of $303.4 billion in February, up 2.2% from January and 20.1% from February 2012.

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The gain in public construction in February was powered by spending on highways, transportation structures and utilities. Apart from the continued decline in spending for school construction, analysts took heart in what appeared to be improved spending by local governments.

“With sequester budget cuts beginning to sink in,” wrote Barclays Bank analyst Peter Newland, “federal outlays are likely to fall further, but the apparent stabilization in state and local outlays is an encouraging sign that the public sector will likely not be the drag on construction activity it has been in recent years.”


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