US construction spending up 1.5 per cent in January

WASHINGTON – U.S. construction spending increased in January by the largest amount in eight months as weakness in homebuilding was offset by a solid rebound in nonresidential activity.

Construction spending increased 1.5 per cent in January, the biggest gain since May, following a 0.6 per cent increase in December, the Commerce Department reported Tuesday. The advance pushed total spending to a seasonally adjusted $1.14 trillion in January, the highest level in more than eight years.

Economists are optimistic that construction will continue to show solid gains this year, helping to boost overall economic growth.

For January, home building activity showed no gain, but spending on nonresidential projects rose 1 per cent following two months of declines. Spending on government projects increased 4.5 per cent with state and local and federal spending both showing gains.

The flat reading for residential construction reflected a slight 0.2 per cent drop in single-family construction and a 2.6 per cent increase in the smaller apartment sector.

The gain in nonresidential building was led by a 6.7 per cent jump in construction of hotels and motels. Spending on office buildings was up but spending in the category that covers shopping centres fell.

Spending on state and local government projects rose 4.4 per cent while spending on federal building projects increased an even bigger 5.8 per cent.

The January increase in activity was bigger than economists had expected and the government also revised up December figures to show a stronger gain of 0.6 per cent, rather than the initial tiny 0.1 per cent rise.

Construction activity for all of 2015 showed a 10.5 per cent increase to $1.1 trillion, the highest annual level for spending since 2007.

A home construction boom peaked in 2006 before falling for the next five years. Construction spending has been climbing since 2012. Economists expect building activity, fueled by home construction, will bolster overall economic growth in 2016.