Builders step up spending for fifth straight month

By Martin Crutsinger Associated Press

WASHINGTON — Builders increased their spending in December for the fifth consecutive month, offering more evidence of improvement in the battered construction industry. Housing, nonresidential construction and government projects all showed gains.

The Commerce Department says spending on construction projects rose 1.5 percent in December after a revised 0.4 percent gain in November. That pushed spending to a seasonally adjusted annual rate of $816.4 billion, the highest level in 20 months.

Even with the gains, spending for all of 2011 was just $787.4 billion. That’s 2 percent lower than the previous year and roughly half the level economists consider healthy. Last year was the worst year on record for single-family home construction, according to a separate government report previously released.

Analysts say it could be four years before the industry returns to full health.

Residential construction rose 0.8 percent on the strength of single-family homes. Nonresidential building jumped 3.3 percent, led by factory construction. Government spending rose 0.5 percent.

Builders broke ground on more homes in each of the last three months of last year. The increase in residential construction contributed to annual growth of 2.8 percent in the October-December quarter.

Still, residential construction fell at an annual rate of 1.4 percent last year, the sixth straight year of decline. The economy expanded just 1.7 percent last year, roughly half the growth rate in 2010.

The construction industry was hit hard by the housing bust and has had trouble recovering since the recession ended more than two years ago.

Severe budget problems have squeezed state and local governments. The federal government has come under pressure to control soaring budget deficits. Both have put pressure on government construction spending.

Private builders haven’t fared much better. While their spending increased, they have scaled back on construction plans and are working from depressed levels.

About 302,000 new homes were sold last year, making 2011 the worst sales year on records dating back to 1963. And it coincides with a report last week that said 2011 was the weakest year for single-family home construction on record.

Still, sales of new homes rose in the final quarter of 2011, as did sales of previously occupied homes. Homebuilders are slightly more hopeful because more people are saying they might consider buying this year. And mortgage rates have never been cheaper.