Construction spending seen as flat in Las Vegas

WASHINGTON -- U.S. builders trimmed activity for a second straight month in February, pushing construction spending down by the largest amount in seven months. There was widespread weakness with spending on home building, office construction and government projects all dropping.

The Commerce Department reported Monday that construction spending fell 1.1 percent in February after a drop of 0.8 percent in January which was revised down from an initial estimate of a decline of 0.1 percent.

With the back-to-back declines, construction spending stood at a seasonally adjusted annual rate of $808.9 billion in February, just 6.1 percent above a low hit in March 2011 and about one-third lower than the high hit during the housing boom.

The construction weakness over the past two months underscored that the nation's construction industry is still struggling to emerge from the 2007-2009 recession, a decline that was triggered by a collapse in housing following an unsustainable boom in that sector.

Analysts said the weakness in construction would have been even more pronounced if not for the mild winter, which meant more building activity than usual in January and February. They predicted a modest improvement in construction in coming months.

"Unless there is another hiccup in the nation's economic momentum, construction spending data will come to reflect the improvement in the broader economy that observers noted during the past half year," Associated Builders and Contractors chief economist Anirban Basu said.

While several major projects are in the planning stages, including Project Neon, construction spending has not increased in Las Vegas, said Sean Stewart, executive vice president of the Nevada Contractors Association and the Las Vegas chapter of Associated General Contractors.

"It looks pretty flat," Stewart said. "Most of the state budgets are frozen, if not less than last year as far as spending on infrastructure and buildings."

The Nevada Department of Transportation recently approved $60 million in preliminary work for Project Neon, a 3.7-mile widening of Interstate 15 from Sahara Avenue to the Spaghetti Bowl interchange.

However, the federal government has not yet passed the highway bill, Stewart said.

"So we have not seen spending from public sector, especially in Las Vegas," he said. "We have seen a slight uptick in private spending for renovation and small projects. So there is a little bit of life in the valley, very little, but what we're seeing is coming from the private sector."

Spending on nonresidential construction projects dropped 1.6 percent following a 2.3 percent decline in January. The February decline reflected weakness in office construction, hotels and shopping malls.

Government construction fell 1.7 percent to an annual rate of $281.6 billion with state and local building projects down 2.1 percent while spending by the federal government rose 1.9 percent.

Review-Journal writer Hubble Smith contributed to this report.