Construction Spending Falls in Nov.

Wednesday, January 3rd 2001, 12:00 am

By: News On 6

WASHINGTON (AP) â€” Construction spending fell by 0.6 percent in November, the weakest performance in four months, reflecting a sharp drop in spending on big government projects and home improvements.

The report, released by the Commerce Department Wednesday, offered the latest sign of a weakening economy. Stock market volatility, lower consumer confidence and higher energy prices have been dampening consumers' and businesses' desire to spend.

On Wall Street, stocks were rebounding from Tuesday's sell-off. After an hour of trading, the Dow Jones industrial average was up 80 points and the Nasdaq had gained 58 points.

The value of construction projects nationwide declined to a seasonally adjusted annual rate of $815.6 billion in November, a 0.6 percent drop from October.

It marked the first decline in construction spending since a drop of 0.7 percent in July. Many analysts were expecting construction spending to be flat.

In October, construction spending rose by 0.8 percent, according to revised figures. That was slightly weaker than the government previously reported.

In November, the weakness in construction spending was led by a 2.1 percent drop in big government projects. The government spent less on building houses and highways in November, but more on military projects.

The report also showed that spending on private construction fell by 0.1 percent in November with all the weakness concentrated in the residential sector, with a 1.5 percent decline.

That reflected a sharp, 6.3 percent decrease in spending on home improvements.

Spending on new single-family homes rose slightly, by 0.3 percent, in November, helped out by cheaper mortgage rates. Spending on apartments and condos also rose.

After hitting a five-year high in May, rates on 30-year fixed-rate mortgages have been falling. They hit a 19-month low of 7.13 percent last week.

Spending by private businesses on nonresidential projects, such as office buildings and motels, rose by 1.2 percent.

The Federal Reserve boosted interest rates six times between June 1999 and May of 2000 to slow the economy and keep inflation under control. Those rate increases worked to slow the economy and dampen consumers' demand for big-ticket items such as cars and homes.

Last month the Fed shifted it chief focus away from fighting inflation to guarding against an economic downturn. The policy shift positioned the Fed to cut short-term rates.

On Tuesday, the National Association of Purchasing Management reported that manufacturing activity fell in December to its lowest point since the country was mired in a recession in 1991, further evidence of a weakening economy. The report fueled fears that the entire U.S. economy could slip into a recession.

With the economy slowing rapidly, many analysts expect the Fed to cut interest rates at its meeting Jan. 30-31, a move that would be designed to boost economic growth.

President-elect Bush has pointed to signs of a softening economy as a reason why Congress should approve his proposal for a big tax cut.