Construction spending rose unexpectedly in March after five straight declines, as strength in nonresidential projects and government building offset a further slide in housing.
The Commerce Department said today construction spending increased 0.3 percent in March, the best showing since a similar rise last September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent.
The surprising rebound may be temporary, however, given all the problems facing the industry. The worst housing slump in decades and a severe financial crisis have made it hard for builders to obtain financing.
Still, pending U.S. home sales rose more than expected in March. The National Association of Realtors said today its seasonally adjusted index of pending sales for previously occupied homes rose 3.2 percent, to 84.6. Economists expected a reading of 82.1.
The index was 1.1 percent above last year’s levels and has risen for two straight months after hitting a record low in January. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.
But spending on private residential projects fell 4.2 percent in March, the latest in a series of declines that began three years ago when the housing bubble burst with disastrous effects for the home industry and the overall economy.
Nonresidential construction rose 2.7 percent in March, the biggest advance in nine months. It marked the second straight increase and was led by gains in office construction, hotels and power plants.
Government building activity also showed strength in March, rising 1.1 percent. A 1.3-percent gain in state and local activity offset a 1.7-percent drop in spending on federal projects.
The various changes left total construction spending at a seasonally adjusted annual rate of $969.7 billion in March. Even with the unexpected increase, building activity is 11.1 percent below year-ago levels, reflecting the country’s steep recession.