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Construction Spending Rises 1.1% in Month

January 03, 1985|Associated Press

WASHINGTON — Construction spending climbed 1.1% in November as strong building activity for factories, offices and shopping centers offset a dip in single-family home construction, the government reported Wednesday.

The Commerce Department said total construction spending rose to a seasonally adjusted annual rate of $322.2 billion in November, up from an October rate of $318.8 billion.

The 1.1% November increase followed a slight 0.03% October gain and nearly equaled a 1.2% August increase. Construction activity since last spring has been essentially flat, primarily because of a pronounced slump in housing construction caused by high interest rates.

Analysts said the big gains in August and November pointed to better times ahead.

"Construction activity is strong and the chances of it remaining strong are good because of the decline in interest rates," Michael Sumichrast, chief economist for the National Assn. of Home Builders, said.

Commercial Increases

Sumichrast said he expected 1.58 million housing units to be started in 1985. While this is fewer than the 1.74 million units he estimated were started in 1984, he said it would be "a respectable level" and more than he had predicted earlier.

The improvement in November came from a big increase in non-residential construction, which rose 5.2% in November to an annual total of $85.2 billion.

Factory construction was up 7.9% while office building and shopping center construction both rose 5.6%.

Residential construction dropped 0.7% during November to a seasonally adjusted annual total of $134.6 billion. A 0.3% decline in building of single-family homes offset a 2.7% gain in construction of apartment units.

Robert Ortner, chief economist at the Commerce Department, said recent, strong gains in home sales and a November gain in home building permits--the first in five months--signaled improvements in residential building.

"With mortgage rates still coming down, I think the near-term outlook is quite good," he said. "Total construction spending should add considerably to growth in the first half of the year, with residential building turning up again."

Government construction spending was unchanged in November from the October pace of $56.9 billion. Categories registering increases included highways, sewer systems and conservation projects. However, the gains were nullified by construction declines for hospitals, military facilities and water systems.

The $322.2 billion rate of construction spending in November was 21% above the rate a year ago.

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