U.S. Construction Spending Fell Less Than Forecast
By Shobhana Chandra
Jan. 5 (Bloomberg) -- Spending on U.S. construction projects fell less than half as much as forecast in November, reflecting gains in commercial and government building that partially cushioned the slump in residential real estate.
The 0.6 percent decline followed a 0.4 percent drop the prior month that was smaller than previously reported, the Commerce Department said today in Washington. The median estimate of economists surveyed by Bloomberg News projected a 1.4 percent decrease.
The downturn in residential real-estate is likely to extend well into a fourth year as prices slide and prospective buyers find it difficult to get credit. The building slump is one reason president-elect Barack Obama has pledged to invest in roads, schools and the U.S. energy network in something akin to the 1950s- era interstate highway construction boom.
``Construction still has more room to fall,'' said Ryan Sweet, an economist at Moody's Economy.com Inc. in West Chester, Pennsylvania, who forecast a 0.9 percent drop. ``Homebuilders are still cutting back and the near-term outlook for public construction has also darkened'' as state and local governments face rising deficits.
The median was based on a survey of 48 economists and ranged from declines of 2.5 percent to 0.3 percent.
Private residential construction spending fell 4.2 percent, the most since July, after dropping 2.1 percent the prior month.
Non-residential construction, including public projects, increased 1 percent, and was up 9.2 percent from a year earlier.
The gain included increases in private construction of power plants and factories that economists say is unlikely to be sustained as the recession deepens and credit dries up.
Government Projects
Public construction increased 1.4 percent, led by work on highways, schools and police stations and jails.
Obama's stimulus package may be worth as much as $850 billion and aims to create or save 3 million jobs. The president elect has also said his economic team is working on plans to address the housing crisis.
Builders broke ground in November on the fewest new homes since record-keeping began in 1959, according to a Commerce Department report on Dec. 16. Building permits, a sign of future residential construction, also fell to the lowest pace on record. Declines in home construction have subtracted from economic growth since the first quarter of 2006.
The Standard and Poor's Supercomposite Homebuilding Index declined 32 percent in 2008 and lost 76 percent of its value since 2005 as demand for new homes declined amid record foreclosures and weak consumer confidence.
Fed Program
The gauge has climbed 56 percent since reaching an eight-year low on Nov. 21 on expectations the Federal Reserve will succeed in reducing the cost of borrowing and increasing the availability of credit for homebuyers. The Fed Bank of New York today began purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae as part of its $500 billion program.
Barratt American Inc., a builder of new homes in southern California, on Dec. 24 filed for bankruptcy protection from creditors, along with three affiliates.
Construction spending figures are based on expenditures over the life of a project, with about 75 percent of value accounted for in the first four months. |
