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— Construction spending fell for the 11th time in the past 13 months in June as continued steep declines in housing activity offset strength in nonresidential building activity.
The Commerce Department reported Friday that building activity dropped by 0.4 percent in June, a decline that was in line with expectations. Home building plunged by 1.8 percent, the 15th straight drop, as builders continued to slash activity to cope with the steepest decline in housing in more than two decades.
Nonresidential activity jumped 0.8 percent to an all-time high of $408.1 billion at a seasonally adjusted annual rate, reflecting a big increase in building activity for hotels and motels and gains in a number of other commercial building projects.
The 0.4 percent fall in overall construction spending left total building activity at a seasonally adjusted annual rate of $1.08 trillion, a decline of 5.9 percent from a year ago.
Analysts believe that housing still has further to fall given that the backlog of unsold homes is remaining at near record levels. The problem is that a rising tide of mortgage foreclosures is forcing even more properties onto an already glutted market. Construction of new single-family homes has already declined nearly 60 percent from the peak in early 2006.
Economists are also concerned that the strength in nonresidential construction could soon start to falter, reflecting the tight credit conditions as banks cut back on all of their lending in the face of billions of dollars of losses on bad mortgage loans.
For June, construction spending by state and local governments fell by 0.4 percent to a seasonally adjusted annual rate of $278.3 billion. Economists expect this activity to weaken in the months ahead as local governments struggle with falling tax revenues in a weak economy.
Construction spending by the federal government rose by a strong 2.4 percent in June to an all-time high of $22.97 billion at an annual rate.
