Construction spending drops sharply in Dec.

By Christopher S. Rugaber AP Economics Writer WASHINGTON (AP) -- Construction spending dropped sharply in December to its lowest level in more than six years as new home building fell by the steepest amount in seven months, evidence that housing remains a weak spot in the economy. The Commerce Department said Monday that spending on new homes, office buildings and highways fell by 1.2 percent to a seasonally adjusted annual rate of $902.5 billion, the lowest since August 2003. That's much worse than analysts' expectations of a 0.5 percent drop. November's figures were revised down to also show a 1.2 percent decline, below the 0.6 percent drop initially reported. Construction spending on new homes and apartments fell by 2.8 percent, the worst downturn since May 2009. Spending on new office buildings and other commercial projects rose by 0.2 percent after falling for seven straight months. That's a surprise, given the difficulty many commercial developers have had in obtaining credit. Housing starts fell 4 percent in December, the government said earlier this month, held back by unusually cold weather. But building permits, an indication of future activity, rose sharply, a sign that activity could rebound in January. Housing activity was also weak in December because a new homebuyer tax credit was originally slated to expire in November and many buyers rushed to complete purchases before the deadline. Congress has extended the credit through April and expanded it. The report closes out a difficult year for the construction industry, which has shed hundreds of thousands of jobs. Overall construction spending fell 12.4 percent to $939.1 billion in 2009, the department said, the steepest drop on records dating back to 1964. Federal construction spending rose by 2 percent to an all-time high of $30.5 billion in December. But cash-strapped state and local governments cut their spending by even more. That caused overall public construction spending to drop by 1.2 percent in December. State and local governments have cut spending on construction for six straight months. Fueled by government stimulus dollars, overall public construction spending grew by 3.7 percent in 2009 to $317.3 billion. Highway construction spending increased by the same percentage to $84.6 billion. Published: Wed, Feb 3, 2010

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