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US construction spending dips 0.3 percent

AP Economics Writer

Jessie Wroczynski of Pieper Electric Inc., Milwaukee, pulls metal-clad cable Dec. 17 while at Griffin Ford in Waukesha. Construction spending declined in November thanks to a drop in federal projects. (Staff photo by Kevin Harnack)

WASHINGTON (AP) – U.S. builders spent less on construction projects in November, the first decline in eight months, as activity was held back by a big drop in spending on federal projects.

Construction spending dipped 0.3 percent in November compared with October, when spending had risen a revised 0.7 percent, the Commerce Department said Wednesday. The November decline was the first drop since March.

It left total spending at a seasonally adjusted annual rate of $866 billion, which is 16.1 percent above a 12-year low hit in February 2011. Even with the gain, the level of spending remained only about half of what’s considered healthy.

In November, spending on housing increased 0.4 percent, but spending on federal building projects fell 5.5 percent. Spending on nonresidential projects such as office buildings and shopping malls dropped 0.7 percent.

The weakness in nonresidential activity reflected declines in construction of office buildings, hotels and the category that includes shopping centers.

Overall government spending dipped 0.4 percent. That reflected the big decline in federal projects and a small 0.1 percent rise in spending on state and local projects.

According to a recent government report, builders broke ground on fewer homes in November after starting work at the fastest pace in more than four years in October. Housing starts are on track for their best year in four years.

Strength in home building has been one of the bright spots for the economy this year. But overall construction is still being offset by weakness in commercial real estate and tight state and local government budgets.

Sales of new homes rose 4.4 percent in November to the highest annual pace in two and a half years. New-home sales are more than 15 percent higher than a year ago.

From July through September, residential construction grew at an annual rate of 13.5 percent. Housing construction is on track to contribute to economic growth this year, the first time that has happened in the five years since the housing bubble burst.

Though new homes represent only a fraction of the housing market, they have an out-size impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the National Association of Home Builders.

Builders are increasingly confident that the housing recovery will endure. A measure of their confidence rose in November to the highest level in 6 1/2 years.

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