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Economic News

Private and public construction spending slid in February

Construction spending is used to measure the health of the economy, and while spending is higher than in 2011, spending for all sectors slid in February, according to the U.S. Census Bureau.

Construction spending down

According to the U.S. Census Bureau at the Department, construction spending did not meet expectations for February, hitting $808.9 billion, 1.1 percent below January construction spending rates, although the figure is 5.8 percent above February 2011.

The Census Bureau reports today that during the first 60 days of 2012, construction spending both public (ex: highways) and private (ex: residential real estate) totaled $111.3 billion which is 7.4 percent above the same period last year.

Private construction

Private construction spending accounted for $527.3 billion of the national total, falling 0.8 percent for the month.

The Census Bureau analyzes residential and nonresidential construction spending separately, noting that residential remained unchanged for the month, sitting at $246.5 billion while nonresidential fell 1.6 percent to $285.3 for the month.

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Public construction

In February, the Bureau reports that the rate of public construction spending was 1.7 percent below January, totaling $281.6 billion.

Also separating types of construction, the Bureau reports educational construction fell 2.5 percent to $69.4 billion, and highway construction fell 2.6 percent to $79.4 billion for the month.

Why construction spending matters

Construction spending is an economic indicator for several measures. First, it is like a health check for these sectors, most notably residential construction which indicates the performance levels of builders – if they are not building, it likely means either credit is tight or that demand is low which are currently both the case, especially given the glut of foreclosure inventory.

Second, construction spending is like a health check for employment and while employment numbers are improving, the once healthy construction industry continues to struggle and with a tough month, hiring on a mass scale is not likely, so manual labor workers continue to compete for the few available jobs.

Combined, both indicate the health of the economy, which shows signs of improving when compared to 2011, but a slide in February may indicate that the sector is bouncing at the bottom, so a recovery may be imminent but not immediate.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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