Construction spending falls less than expected

WASHINGTON (Reuters) - U.S. construction spending fell a slim 0.6 percent in November, the Commerce Department reported on Monday, showing that building at the end of 2008 was stronger than Wall Street had expected.

Analysts polled by Reuters had anticipated the drop to be a much steeper 1.3 percent. October's change was also revised to down 0.4 percent from the originally reported drop of 1.2 percent.

Still, private home-building, which makes up roughly a third of total spending, fell a sharp 4.2 percent to an annual rate of $328 billion, the lowest since August 1999.

Private residential construction spending is likely to keep tumbling, with reports last month showing that applications to build new homes fell to record lows.

"The fact is we are stilling talking about negative numbers," said Ken Mayland, president of Clearview Economics LLC in Pepper Pike, Ohio. "Residential construction is down by a huge amount and accelerating to the downside."

Public spending, on the other hand, increased 1.4 percent. Federal building was up 6 percent, and state and local gained 1 percent. Total public spending reached a record high rate in November of $322 billion.

The Commerce Department said educational construction rose 1.3 percent in November, as did highway building.

"Public construction is up. There will be a massive stimulus plan which could help the economy to recover in 2009," Mayland said.

Compared to November 2007, total construction was off 3.3 percent, with private construction falling 7.4 percent. Public construction was up 7.9 percent year-on-year.

(Reporting by Lisa Lambert in Washington and Richard Leong in New York, Editing by Neil Stempleman)