- The Washington Times - Monday, February 3, 2003

WASHINGTON, Feb. 3 (UPI) — The Commerce Department said Monday total construction spending rose for the fourth consecutive month during December, jumping 1.2 percent to a seasonally adjusted annual rate of $858.3 billion.

Most economists on Wall Street were expecting construction spending, which accounts for almost 5 percent of the nation's economy, to rise 0.4 percent during the month after rising 0.9 percent in November and jumping 1 percent in October of last year.

The December rise was the largest since February 2002. But, for the full year, construction spending rose only 0.4 percent, the weakest year since 1991, the Commerce Department said.

Construction spending is the dollar value of new construction activity on residential, nonresidential, and public projects.

Investors watch the report since the economic backdrop is the most pervasive influence on financial markets, construction spending has a direct bearing on stocks, bonds and commodities.

In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends.

Analysts noted businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home. That's why construction spending is a good indicator of the economy's momentum.

The latest report showed construction of new houses rose 2.8 percent after jumping 1.6 percent in November.

Spending on multifamily dwellings, such as apartments, jumped 6.9 percent after rising 0.5 percent a month earlier.

The government said nonresidential construction fell 1.9 percent in the final month of 2002 after rising 0.9 percent a month earlier.

The report also showed public construction spending rose 1 percent after rising 1.5 percent in November.

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