Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 4, 1992 TAG: 9202040076
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
REPORTS TRY TO FIND BOTTOM
Construction spending on homes, office buildings and other projects shrank 9.3 percent in 1991, the sharpest contraction since World War II, the government said Monday.The severe cutback was concentrated in the first half of the year and spending actually picked up in the last six months, though it was down again in November and December.
Separately, a survey of 300 corporate-purchasing executives suggested that as the year began the rest of the economy remained sluggish and the manufacturing sector continued to decline.
The National Association of Purchasing Management said Monday its index of business activity was unchanged in January at 47.4 percent. A reading of less than 50 percent suggests manufacturing is declining; a reading under 44.5 percent would indicate the overall economy was shrinking.
The Commerce Department said residential, non-residential and government spending on construction totaled $404.9 billion last year. That was down from $446.4 billion in 1990 and marked the lowest level since 1985, when $377.4 billion was spent on apartments, factories and other private and government buildings.
Last year's decline also was the The vacancy rates for office buildings and strip shopping centers is still too high. David Berson Federal National Mortgage Association first since the recession year of 1982, when spending fell 4 percent. It was the steepest since spending plunged 36.6 percent in 1944.
Economist David Berson of the Federal National Mortgage Association said most of the decline occurred in the first half of the year. Construction spending actually picked up at a 5.7 percent annual rate in the last six months, he said.
Analysts attributed the collapse from January through June to the Persian Gulf War, the recession and a glut of already-built structures such as office buildings and shopping centers.
Berson forecast continued improvement in the residential sector, particularly single-family homes. The Commerce Department reported last week that applications for building permits, often a barometer of future activity, jumped in December.
"The vacancy rates for office buildings and strip shopping centers is still too high," Berson contended, saying the non-residential sector will remain flat and possibly decline further this year.
An exception, he added, might be increased spending on industrial buildings such as factories - "once the economy improves."
The purchasing managers index had fallen for three straight months as manufacturers, responding to poor consumer demand, cut back their business.
"I have a sense that we're building a bottom here, if not in January, then in the month or two to come," said Robert Bretz, chairman of the purchasing managers' survey committee and head of corporate purchasing for Pitney Bowes Inc.
He was optimistic that lower interest rates would give consumers and businesses the chance to lighten their financial burdens and allow for more spending.
The purchasing managers survey found that prices for raw materials fell last month. Bretz said that could be a further incentive for manufacturers to boost production.