Construction spending in the U.S. unexpectedly fell in February, reflecting broad-based declines that indicate the building industry will take time to stabilize.
The 1.1 percent decrease, the biggest in seven months, followed a revised 0.8 percent retreat in January that was larger than previously estimated, Commerce Department figures showed today in Washington. The median estimate of 45 economists surveyed by Bloomberg News called for a 0.6 percent increase.
The prospect of more foreclosures is keeping downward pressure on home prices, which may discourage builders from taking on new projects. At the same time, budget cutbacks at the state, local and federal government level are also weighing on the construction industry.
“There is an exaggerated sense that U.S. housing may be on the mend,” Derek Holt, vice president of economics at Scotia Capital in Toronto, said before the report. “People lack the confidence and the means to buy and are instead renting. This is benefiting home construction firms that are focused upon this segment, but doesn’t imply consumer enthusiasm.”
Estimates in the Bloomberg survey ranged from a decline of 0.6 percent to a 1.5 percent gain. The Commerce Department revised January’s reading from the 0.1 percent drop initially reported.
Construction spending increased 7.4 percent in the 12 months ended in February, before adjusting for seasonal variations.
Private construction spending in February fell 0.8 percent from the prior month, reflecting decreases in non-residential projects.
Private residential outlays were little changed in February, the report showed. A decrease in homebuilding offset a 1.2 percent gain in home improvement expenditures. Private non-residential projects fell 1.6 percent, hurt by a drop in power plants.
Spending on public construction decreased 1.7 percent from the prior month. Federal construction spending climbed 1.9 percent, while state and local construction dropped 2.1 percent, the most since July.
The decrease in total spending signals favorable weather failed to lift the industry in February. The average temperature was 38.2 degrees Fahrenheit (3.4 Celsius), 3.6 degrees warmer than the 20th century average and the 17th warmest February in 118 years, according to the National Oceanic and Atmospheric Administration.