January Construction Spending Falls, Ending Nine Months of Gains

Spending on construction declined 2.1 percent between December and January, according to a federal report, with decreases in public and private spending alike. Industry officials are projecting further potential shortfalls due to the federal spending cuts that begin this month under sequestration.

Construction spending snapped a nine-month string of monthly gains with a sharp decline in January, a disappointing follow-up to the biggest back-to-back gain in a year.

Construction put in place totaled $883 billion in January, down 2.1 percent from the previous month. December was revised up to $903 billion from an initial estimate of $885 billion due to new data on power and energy construction.

Figures for December and November were revised up to show gains of 1.1 percent and 1.9 percent respectively, the best performance since the same two months in 2011.

Construction spending increased 7.6 percent in the 12 months ended in January, before adjusting for seasonal variations. Private construction spending dropped 2.6 percent from the prior month.

"At first glance, January was a bad month for construction, with a sharp drop in private nonresidential spending, along with small dips in residential and public construction," said Ken Simonson, the Associated General Contractors of America's chief economist. "However, the January figure was higher than the year-ago level. Moreover, steep upward revisions today in the preliminary numbers for November and December suggest January may ultimately prove to have been positive, as well."

A 4.3 percent drop in home-improvement spending depressed homebuilding outlays, while spending on single-family projects rose 3.6 percent and multifamily housing climbed 1.7 percent.

Private non-residential projects decreased spending by 5.1 percent, led by a 14.5 percent slump for power plants. Spending on public construction declined 1 percent from the prior month. Federal construction spending fell 1.3 percent, while state and local outlays retreated 1 percent to the lowest level since November 2006.