Construction Spending in U.S. Decreased 0.8% in January (Courtney Schlisserman)

  Construction spending in the U.S. fell by the most in three months in January, pulled lower by the biggest decline in homebuilding since July.

  By Courtney Schlisserman

  March 1 (Bloomberg) -- Construction spending in the U.S. fell by the most in three months in January, pulled lower by the biggest decline in homebuilding since July.

  Spending on residential and non-residential projects dropped 0.8 percent after a revised 0.6 percent increase in December, the Commerce Department said today in Washington. The government previously estimated a drop in December spending.

  Homebuilders are reluctant to start work on new projects as buyers cancel contracts and inventories of unsold homes swell. A report yesterday showing new-home sales fell by the most in 13 years suggests that construction will continue to falter, weighing on economic growth.

  ``Residential construction spending has been steadily declining since spring 2006, and we expect this trend to continue,'' Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York, said before the report.

  Private residential construction fell 1.8 percent, the 10th straight decline.

  Economists expected construction spending to fall 0.5 percent after the 0.4 percent drop originally reported for December, according to the median of 46 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 1.2 percent to an increase of 0.4 percent.

  Residential construction fell at an annual rate of 19.1 percent in the fourth quarter and subtracted 1.2 percentage points from economic growth, the government said yesterday. The economy grew at a 2.2 percent rate, less than the initial estimate of 3.5 percent.

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