BUSINESS

US construction spending drops in February, but pickup expected in spring and summer

04/01/2015 10:07 EDT | Updated 06/01/2015 05:59 EDT
WASHINGTON - U.S. construction spending slipped for the second month in February, pulled down by a drop in single-family home building.

Construction spending fell 0.1 per cent in February after a revised 1.7 per cent drop in January, the Commerce Department reported Wednesday.

The result in part reflects bitter winter weather that constrained construction in many parts of the country during the month. Economists are hopeful for a rebound in the spring and summer as the economy strengthens.

Still, the economists at IHS Global Insight called February's numbers "another poor report" and said in a research note that sluggish construction spending is likely to pull down overall economic growth for the first quarter of 2015.

Last month, the government said that the pace of housing starts plummeted 17 per cent in February from January's rate. Home construction slid 56.5 per cent in the Northeast and 37 per cent in the Midwest, the two regions that endured the brunt of the winter storms.

In Wednesday's report, private spending on construction of single-family homes declined 1.4 per cent — the biggest drop since 2010, noted Gregory Daco, head of U.S. macroeconomics at Oxford Economics. Spending on apartments was up 4.1 per cent. Nonresidential construction spending rose 0.5 per cent, led by a 5.5 per cent jump in hotel construction and a 6.8 per cent surge in factory construction.

Total private construction spending, which rose 0.2 per cent, was offset by a 0.8 per cent retreat in public construction spending. State and local governments cut spending by 1.6 per cent. They account for more than 90 per cent of government spending on construction. The federal government increased construction spending by 9 per cent.

Overall construction spending was up 2.1 per cent from February 2014.

The economy added 338,000 construction jobs last year, the most since 2005. Still, damage from the collapse of the housing market lingers: The United States has nearly 1.4 million fewer construction jobs than it had in 2006.