Construction spending fell a sharp 2.9 percent in January, the biggest decline in 10 months, the government reported this week.
The Commerce Department said that construction spending fell to a seasonally adjusted annual rate of $395.2 billion in January following a 0.4 percent increase in December.
The January decline, the largest since a 3.3 percent drop in March 1987, stemmed from weakness in both housing and non-residential building.
Residential construction fell 2.6 percent to a seasonally adjusted annual rate of $191.3 billion as construction of single-family homes declined 2.2 percent and multi-family construction dropped 6.4 percent.
Analysts believe that single-family construction will strengthen in the coming months because of recent mortgage-rate declines, but they are pessimistic about any improvement in apartment building. This sector has been hurt by high vacancy rates and the adverse impact of the new tax law on real estate investments.
Nonresidential construction fell 2.2 percent to a seasonally adjusted annual rate of $90.9 billion, reflecting declines in construction of office buildings, hotels, factories and shopping centers.
Government construction spending was off a sharp 4.9 percent in January to a rate of $74.3 billion. The weakness in the public sector was led by a 3.9 percent fall in the largest government construction area, highway building, which declined to $24.8 billion.