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Building spending continues to decline

Drop in government construction cited

– Spending on U.S. construction fell in March as the biggest drop in government projects in more than a decade overwhelmed strength in home building.

Construction spending fell 1.7 percent in March compared with February, the Commerce Department reported Wednesday. It marked the second decline in the past three months.

January activity plunged a record 4 percent, which represented a downward revision from a previous estimate of a 2.1 percent decline.

Even with the recent weakness, construction activity was 4.8 percent higher in March than a year ago at a seasonally adjusted $856.7 billion.

For March, private residential construction rose 0.4 percent, the only major sector showing a gain.

Government construction activity fell 4.1 percent, the biggest drop since March 2002, while private nonresidential building was down 1.5 percent.

The weakness in government activity occurred at all levels. Spending by state and local governments was down 4.2 percent while spending by the federal government on construction projects was down 1.7 percent.

Economists are expecting federal activity to be reduced in coming months as different agencies cope with across-the-board cuts that went into effect March 1.

The weakness in nonresidential activity reflected declines in commercial projects such as shopping centers.

The rise in residential construction continued a trend that began last year and showed that the housing recovery is being sustained by rising demand. Spending for single-family homes was up 1.6 percent while multi-family construction rose 0.3 percent in March.

For all of 2012, construction spending increased 9.8 percent.