Public Spending Cuts Slowing Construction Growth

Federal spending on construction projects fell 1.7 percent in March, and state and local spending, which encompasses a larger share of overall spending than federal outlays, tumbled 4.3 percent, the biggest drop since March 2002. Overall public construction spending fell 4.1 percent, the largest monthly decline since March 2002, to a $258.3 billion annual rate, the lowest since October 2006.

Construction spending declined 1.7 percent in March, driven by the largest decrease in government-funded projects in more than a decade.

The decline brought spending down to an $856.7 billion annual rate, the least since August, according to a May 1 Commerce Department report. The spending increased 4.7 percent since March 2012, without adjusting for seasonal variations.

Public projects dropped by 4.1 percent, the biggest decrease since March 2002. The plunge overtook a gain in homebuilding in March, and revised figures also showed construction spending plunged by a record in January, indicating the industry will contribute less to first-quarter GDP than at the end of 2012.

February's reading was revised to show a 1.5 percent gain from the initial estimate of a 1.2 percent advance. January now shows a 4 percent drop, the largest decline since records began in 1993.

Private construction spending declined 0.6 percent from the prior month.

The drop in spending on public construction brought the value down to $258.3 billion, the lowest since October 2006. Federal outlays dropped 1.7 percent and state and local agency spending fell 4.3 percent.

In contrast, new-home construction climbed to its highest level in almost five years last month. Starts increased 7 percent to a 1.04 million annual rate, the most since June 2008, from a revised 968,000 pace in February.