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US construction spending dips 0.2% in December

Workers put up a building under construction in Philadelphia on Dec. 3. Spending on U.S. construction projects edged down a slight 0.2% in December 2019, closing out a year when total construction showed its first annual decline in eight years. (AP Photo/Matt Rourke, File)

Workers put up a building under construction in Philadelphia on Dec. 3. Spending on U.S. construction projects edged down a slight 0.2% in December 2019, closing out a year when total construction showed its first annual decline in eight years. (AP Photo/Matt Rourke, File)

By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — Spending on U.S. construction projects edged down by a slight 0.2% in December, closing out a year when total construction showed its first annual decline in eight years.

The Commerce Department said Monday that the decline was the first monthly drop seen since a 0.9% fall in June. For the year, construction spending fell 0.3%, marking the first setback since a 2.6% decrease was seen in 2011.

The fall-off results from weakness in nonresidential construction, which fell 1.8%, showing the sharpest setback since April. Spending for most major categories from office building to shopping centers declined.

Spending on home building rose a solid 1.4%. This category continues to benefit from falling mortgage rates and a strong labor market.

Spending by the federal government on construction projects rose a sharp 2.1% in December to the highest level in seven years, but this was offset by a 0.6% drop in spending on large state and local government projects.

The 0.3% drop in construction spending for 2019 followed eight straight years of gains and left total spending at $1.3 trillion in 2019, down from $1.31 trillion in 2018, a year when spending had risen 3.3%.

It was the first annual setback since a period of five straight yearly declines from 2007 through 2011 as the construction industry was battered by a deep recession that had been triggered by the bursting of a housing boom in the middle of the past decade.

For last year, home building was down 4.7% while nonresidential construction was basically flat and public construction posted a 7.1% increase.

Economists believe home building will show further gains this year, helped by the Federal Reserve’s decision to cut interest rates three times last year in an effort to protect the U.S. economy from a global slowdown and the adverse effects of a U.S.-China trade war.

The 1.4% gain in residential construction in December reflected a 2.7% jump in construction of single-family homes which offset a 1.8% drop in the smaller and more volatile apartment sector.

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