The Commerce Department said construction spending increased 1.4 percent in March, to an annualized rate of $768.9 billion. Residential construction rose by a strong 2.6 percent in March, to $229.1 billion, driven by improvements to existing housing, which climbed 6.9 percent for the month.

The Associated General Contractors of America notes total construction spending remains 6.7 percent lower than a year ago, when a Federal first time buyers program was in force, and 37 percent lower than the March 2006 peak.

“It is encouraging to see increases in construction spending across most nonresidential categories,” said Ken Simonson, AGC chief economist.

Private non-residential construction spending on offices and businesses, rose 1.8 percent in March. Spending on construction for lodging increased the most in March, up 6.1 percent for the month; followed by manufacturing, up 5.2 percent for the month; and health care, up 2.4 percent for the month.

Simonson predicts spending on certain private construction sectors will increase over the coming months, though publicly-funded construction activity is likely to decline. “I expect we’ll see improvements in the next few months in manufacturing, warehouse, hospital and data-center construction, but these gains may not offset declines in school and other public construction,” he said.

New single-family spending dropped 1 percent in March and new multifamily construction 2.2 percent. Cuts in local, state and federal public investments in infrastructure will dampen public sector spending, according to AGC's analysis. 

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