Construction spending rises, public outlays weak

Construction spending barely rose in March as investment in public projects dropped to a five-year low, according to a government report on Tuesday that could see the first-quarter economic growth estimate lowered.

Construction spending edged up 0.1 percent to an annual rate of $808.07 billion, the Commerce Department said, after a revised 1.4 percent drop in February.

Economists polled by Reuters had expected construction spending to rise 0.5 percent after a previously reported 1.1 percent decline in February.

The tiny rise in construction outlays in March and a downward revision to the prior month's figure could have an impact on the government's initial estimate for first-quarter gross domestic product reported last week.

The economy grew at a 2.2 percent annual rate, slowing from the fourth-quarter's 3 percent pace, held back in part by a steep decline in spending on nonresidential structures and government outlays.

Overall construction spending was up 6.0 percent compared to March 2011.

Private construction spending increased 0.7 percent after falling 1.9 percent in February. Spending on residential projects rose 0.7 percent, partly reflecting home improvements.

Investment in multifamily residential projects fell 3.1 percent, while outlays for single-family buildings increased 3.8 percent.

Residential construction grew at its fastest pace since the second quarter of 2010, according to last Friday's GDP report.

Private nonresidential construction rebounded 0.7 percent in March, breaking two straight months of declines.

Spending on public sector construction fell 1.1 percent to $276.16 billion, the lowest level since February 2007. That was as outlays on state and local government projects dropped 1.6 percent to the lowest level since November 2006.

Spending by the federal government on construction projects surged 3.8 percent.