US construction spending plunges

Construction spending took its biggest nosedive in 14 years and manufacturing activity contracted.

US construction spending took its biggest nosedive in 14 years and manufacturing activity contracted, fresh trouble signs for a struggling economy. The Commerce Department reported Monday that construction spending plunged by 1.7 percent in January. Builders slashed spending on residential projects, but the weakness spread beyond that ailing sector. There were cutbacks in spending on, among other things, hotels and motels, highways and various projects by state and local governments. Another report showed fallout from housing and credit problems cutting deeper into manufacturing. The Institute for Supply Management 's manufacturing index clocked in at 48.3 in February. That was the weakest reading in nearly five years. A reading above 50 indicates expansion. Anything below that shows contraction. Still, the reading was a bit better than the 48.1 that economists were forecasting. The latest showing on construction activity was worse than economists were expecting. They were forecasting a smaller decline of around 0.8%. The 1.7% plunge in total construction spending came after a 1.3% decline in December. It was the largest drop since January 1994, when construction spending plummeted by 3.6%. The one-two punch of the housing and credit crises is threatening to push the country into a recession or possibly has done so already. Harder-to-get credit has thwarted some would-be home buyers and record-high foreclosures are adding to the glut of unsold homes. That's aggravating the housing industry's woes. Spreading problems are slowing other sectors of the economy and causing employers to restrain hiring.