Construction Spending Takes Troubling Plunge

USA Today (03/04/08) P. 4B; Kirchhoff, Sue
According to the latest report from the U.S. Commerce Department, spending on housing, public works and commercial real estate construction has declined 1.7 percent from December to January--the largest monthly drop since 1994. Most of the retreat was in housing, which tumbled 3 percent from the end of last year and almost 20 percent from a year earlier. More importantly, however, High Frequency Economics chief economist Ian Shepherdson noted that the 1.2-percent January dip in commercial construction spending represents a troubling turn of events, as commercial development had posted increases for 15 straight months before then. He believes a sharp downturn in the sector is overdue, remarking, "There is every reason to think this is the start. With banks increasingly reluctant to lend . . . activity will plunge for the foreseeable future, adding to the downward pressure on growth."