Construction spending set a record for the eighth straight month in February, reaching a seasonally adjusted annual rate of $1.19 trillion, the Census Bureau reported last week. It was 0.8-percent higher than the upwardly revised January mark and was especially strong given that the weather in February was thought to be less conducive to construction than the mild, dry conditions of January, according to Ken Simonson, chief economist for the Associated General Contractors of America.

For January and February combined, construction spending exceeded the totals for the same months of 2005 by 8.5 percent, with private nonresidential construction having the highest growth rate, for a change: 9.9 percent, compared to 7.8 percent for private residential and 8.4 percent for public construction. The January and February increases were particularly strong for shopping centers, 61 percent (after swelling 39 percent in 2005 as a whole and 26 percent in 2004); private hospitals, 22 percent, and manufacturing and general commercial warehouses, 20 percent each. The previously lackluster office segment was up 18 percent. Both single- and multi-family new residential construction shot up more than 14 percent, although residential improvements fell 8.9 percent. Builders still have a big enough backlog of unbuilt houses and condos that residential construction spending may hold up for a few more months even if new-home sales have peaked.

On the public side, there were double-digit increases for sewage and waste disposal, 28 percent; education, amusement and recreation, and public safety, all 13 percent; and water supply construction, 11 percent. Highway and street construction rose 8.2 percent, Simonson said.

In addition, the United States-Mexico cement agreement went into effect as scheduled last week. The agreement, which AGC had lobbied for, reduces the antidumping on Mexican cement from $26 per metric ton to $3 until March 31, then ends the duty. Imports of Mexican cement will be limited to three million metric tons for three years (up from two in 2005) and allocated by region and producer, although the president can boost the limit by 200,000 metric tons in the event of a natural disaster that increases the need for imported cement.

Around the time the agreement was signed in March, Mexican producer Cemex announced it would add 1 million tons of capacity to its plant in Balconnes, Texas, and add capacity near the Mexico-Arizona border, Cruz Azul said it intended to begin exporting from Mexico, and other firms contacted AGC for helping in getting permits to expand production.

Manufacturers’ orders (excluding semiconductor manufacturing) edged up 0.2 percent in February, seasonally adjusted, following a 3.9 percent decline in January (initially estimated as -4.5 percent), Census reported. For January and February combined, total orders were up 7.5 percent from the same period of 2005. A sustained rise in orders can lead to more demand for factory construction to accommodate the added output. Orders for construction materials and supplies climbed 0.7 percent for the month and 10.5 percent year-to-date; orders for construction machinery fell 0.6 percent for the month but rose 4 percent year-to-date.

Purchasing executives in manufacturing who participated in the Institute for Supply Management’s March survey, released last week, reported “continued strength in new orders and production. … Prices are still a major concern.” Items important to construction that were up in price included aluminum and copper products, freight, and steel. Natural gas was reported down in price. No items were listed in short supply.