Construction Spending in U.S. Decreased More Than Estimated in February

Construction spending in the U.S. fell more than forecast in February, indicating the economic recovery has not yet spread to the building industry.

The 1.4 percent drop was the third in a row and brought the value of all projects down to a $760.6 billion annual rate, the lowest since October 1999, Commerce Department figures showed today in Washington. The median estimate of economists in a Bloomberg survey called for a 0.2 percent decline.

Outlays on home building dropped during the month as new- home prices and sales continued to fall. In addition, deficit- strapped state and local governments are restricting funding for public works.

“The housing sector still looks to be in pretty dire straits,” Scott Brown, chief economist at Raymond James & Associates Inc. in St Petersburg, Florida, said before the report. “We’re seeing prices still weakening at this point. If we get much better job growth, we’ll have better results in the housing sector.”

Another report today showed employers added 216,000 workers to payrolls in March, and the jobless rate dropped to a two-year low of 8.8 percent, beating the median projection of economists surveyed by Bloomberg. Private employment, which excludes government agencies, climbed by 230,000 after a 240,000 February increase, marking the biggest back-to-back gain since 2006.

Estimates for the construction figures of 49 economists ranged from a drop of 1.2 percent to an increase of 2.5 percent. The Commerce Department revised the January reading down to a 1.8 percent from a previously estimated decline of 0.7 percent.
14-Year Low

Private construction spending fell 1.4 percent in February from the prior month to a $468 billion annual pace, the weakest since April 1997. Homebuilding outlays decreased 3.7 percent.

Spending on public construction slid 1.3 percent, the fifth consecutive drop, the report said. Federal construction spending increased 0.7 percent, while outlays at state and local agencies fell 1.5 percent.

Faced with declining home prices and the swelling supply of unsold properties, residential real estate developers are reluctant to increase construction. Housing starts in the U.S. declined more than forecast in February to the slowest pace since April 2009 and building permits slumped to a record low, the Commerce Department said March 16.

Residential real-estate prices dropped in the 12 months to January by the most in more than a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 3.1 percent, the biggest year-over-year decrease since December 2009, the group said earlier this week.
Builder Concern

Home sales haven’t recovered for the U.S. spring selling season, usually the busiest time for buyers, Stuart Miller, chief executive officer of homebuilder Lennar Corp. (LEN), said during a conference call with investors March 29.

“The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle,” Miller said. “We’ve all seen evidence of a sluggish recovery in the reported national sales numbers for both existing homes and new homes and we have clearly seen the same on a real time basis in the field. We continue to believe that the housing recovery will take time and patience and will be inconsistent and uneven.”

Miami-based Lennar, the second-most profitable U.S. builder last year, unexpectedly reported net income for the first quarter after booking a lawsuit settlement and adding income from its distressed-investing unit.