Washington, July 1--Spending on construction projects dropped in May by the largest amount in a year as builders coped with wet weather in some parts of the country as well as a sluggish economic recovery.
The value of construction projects under way in May clocked in at a seasonally adjusted annual rate of $869.8 billion, representing a 1.7 percent decline from April's level, the Commerce Department reported Tuesday. It marked the third month in a row that construction spending went down.
The latest snapshot of construction activity was weaker than analysts were expecting. They were forecasting a 0.3 percent increase in construction spending in May.
The weakness was broadbased, with private builders cutting back spending on residential projects as well as commercial ventures, such as office buildings. Government spending on big public works projects declined to it lowest level in nearly a year.
To nudge the lackluster economy, the Federal Reserve cut a key interest rate last week by a quarter percentage point to 1 percent, the lowest level in 45 years. Its hope was that lower borrowing costs would motivate consumers and businesses to spend and invest more, giving a boost to economic growth.
Analysts are hopeful the economy will pick up momentum in the second half of this year as a fresh round of tax cuts and super-low interest rates take hold.
The 1.7 percent drop in construction spending in May matched the decline posted for the same month a year ago. The $869.8 billion pace of construction spending in May marked the lowest level in six months.
The decline in May was led by a 1.8 percent drop in big government projects, where spending fell to a rate of $207.2 billion, the lowest level in 11 months. Government spending on highways and streets went down by 4.5 percent in May, spending on public housing dropped by 3.8 percent and spending on schools dipped by 0.5 percent.
Private builders cut spending on commercial projects by 0.4 percent, pulling down spending to a rate of $157 billion in May. Spending on office buildings fell by 0.8 percent in May and spending on educational structures declined by 4.9 percent.
Spending by private builders on residential projects declined by 0.9 percent in May to a rate of $445.4 billion, the lowest level since November.
The residential side of the construction market, however, has been holding up fairly well during the economic slump, supported by low interest rates in general and low mortgage rates in particular. But the commercial side has been largely weak, reflecting the wariness of companies to boost capital spending and hiring, major factors restraining the recovery.
