Government work helps offset weak month for construction

WASHINGTON -- Construction spending was flat in July as an increase in government work helped to blunt cutbacks in private builders' construction projects, which dropped to the lowest level in nearly six years.

After declining for two months, the level of construction spending in July was unchanged at a seasonally adjusted annual rate of $834.1 billion, the Commerce Department reported Wednesday.

That report along with more forward-looking data showing that manufacturing barely grew in August point to a sputtering economic recovery, economists said.

In the construction market, the commercial side continues to be a source of weakness, reflecting reluctance by businesses to make big commitments in capital spending--including new factories and other buildings--given economic uncertainties, analysts said.

Another possible factor for sagging commercial construction: difficulties some companies are having in obtaining terrorism insurance since the Sept. 11 attacks on the World Trade Center and the Pentagon, some economists said.

"Nonresidential building has been the weakest part of the construction picture and a big victim of 9-11," said economist Clifford Waldman of Waldman Associates.

Spending on all commercial projects by private builders fell by 2.2 percent in July to a rate of $162.1 billion, the lowest level since September 1996. Spending on industrial complexes dropped by 4.3 percent in July to a rate of $15.5 billion, the lowest level since May 1978.

And, spending on hotels and motels dipped to a rate of $10 billion in July, the lowest level since in six years. Spending on schools and hospitals also declined. However, spending on office buildings edged up by 0.3 percent.