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Slide in Home Improvement Projects Fuels Spending Plunge

ALBUQUERQUE, N.M. — U.S. construction spending fell in July from June by the largest amount in a year, weighed down by a big drop in spending on home improvement projects.

Spending on construction of single-family homes and apartments increased slightly.

The Commerce Department said Tuesday that overall construction spending declined 0.9 percent in July. It followed three months of gains, which were driven by increases in home and apartment construction.

The June decline left spending at a seasonally adjusted annual rate of $834.4 billion. That’s nearly 12 percent above a 12-year low hit in February 2011. Construction activity is roughly half of what economists consider to be healthy.

“In short, a weaker-than-expected report,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.

The recovery remains bumpy and unlike previous recoveries, Jim Folkman, executive director of the HBA, formerly the Central New Mexico Home Builders Association, told the Journal.

“I think the volatility that we see from month to month in terms of housing starts or construction spending is simply an indication of how fragile the recovery is in our industry,” he said.


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“The typical paradigm we’ve experienced over the last six decades of housing recovering in a definitive and steady fashion is not playing out this time, and until it does our economy overall won’t begin to recover.

“I continue to believe that we are experiencing some fundamental shifts in the dynamics of our economy, and until those work themselves out we’ll remain stuck in a slow-growth mode,” Folkman said.

Spending on residential construction fell 1.6 percent in July from June to a seasonally adjusted annual level of $264.6 billion. But that was dragged lower by a 5.5 percent decline in home improvement projects.

Spending on single-family homes rose 1.5 percent, the fourth straight monthly gain. And spending on apartment construction was up 2.8 percent, the ninth straight gain.

Spending on nonresidential projects fell 0.9 percent to an annual level of $294.1 billion. Spending on government projects dropped 0.4 percent to a level of $275.7 billion. Spending on state and local building projects fell 0.3 percent, while spending on federal construction projects was down 1.3 percent.
— This article appeared on page B1 of the Albuquerque Journal