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Construction dips as housing falls for record eight straight month

By ASSOCIATED PRESS
Published January 4, 2007

WASHINGTON - Construction activity showed further weakness as spending on homes dropped for a record eighth consecutive month.

The Commerce Department reported Wednesday that building activity edged down 0.2 percent in November, to a seasonally adjusted annual rate of $1.18-trillion. That followed declines of 0.3 percent in October and 0.8 percent in September.

The weakness was led by a 1.6 percent plunge in home construction, which followed an even bigger 1.7 percent drop in October. Analysts believe home building will remain weak for several more months as builders struggle to work down a huge backlog of unsold homes.

The slump in housing has been a big drag on the overall economy, trimming 1.2 percentage points off growth in the July-September quarter, when the economy slowed to a lackluster 2 percent growth rate. The slump in October and November indicates housing will remain a serious drag in the final three months of the year.

The housing decline pushed spending on residential buildings down to a seasonally adjusted annual rate of $589.3-million in November.

Meanwhile, U.S. manufacturing activity expanded in December after contracting the previous month, the Institute for Supply Management said Wednesday, leaving economists cautiously hopeful about the sector's prospects for next year.

The trade group said its manufacturing index registered 51.4 in December, compared with 49.5 in November, which was the first time the sector's activity shrank since April 2003. A reading below 50 indicates contraction, while above 50 signals expansion.

[Last modified January 3, 2007, 23:11:08]