<p>Construction spending fell six-tenths of a point in July, according to the Commerce Department. The drop was twice as much as analysts had forecast. Meanwhile, housing activity fell to its lowest level since March 2001, and nonresidential activity also declined. Some analysts expect nonresidential construction to weaken as banks tighten lending standards.</p>
<p>Housing
activity fell for a 16th consecutive month, declining 2.3% to a
seasonally adjusted annual rate of $357.8 billion, the lowest
level since March 2001.</p>
<p>Nonresidential
activity, which had been offsetting some of the weakness in the
residential sector also fell in July, dropping seven-tenths to an annual rate
of $416.8 billion. It was the first setback in that category since
December.</p>
<p>Analysts are concerned that nonresidential building
will weaken in coming months as banks tighten lending standards for nonresidential projects
as well.Overall, construction spending totaled $1.084 trillion
at a seasonally adjusted annual rate in July. Last month's drop
represented the largest setback since a nine-tenths decline in February.</p>
<p>The
government revised the June performance to show a 0.3% increase instead
of the 0.4% decline that had been originally reported.</p>
<p>Construction activity is 4.7% below the level of a year ago, representing one of the major drags on the current economy.</p>
<p>For
July, the seven-tenths drop in nonresidential construction followed gains of
1.7% in June and 3.1% in May. Last month's weakness reflected declines
in the construction of factories, power plants, schools and health care
facilities.</p>
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<p>Public
construction projects rose by 1.4% to $309.7 billion in July as
spending for federal, state and local building projects rose to
all-time highs.</p>
<p>Spending for state and local projects was up 1.2%
to an annual rate of $285.68 billion, while construction of federal
projects rose by 3.9% to an annual rate of $24.05 billion.</p>
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