Construction spending in the United States dropped in January after the back-to-back increases. It is an indication that a slump is happening in nonresidential and government projects. Outlays declined 2.1 percent, which is the biggest decrease since July 2011 to a $883.3 billion annual rate.

The average forecast of 45 economists polled by Bloomberg called for a 0.4 percent increase. Figures for November and December were changed to show gains of 1.9 percent and 1.1 percent respectively. These are the best back-to-back performance since the same period in 2011.

Private non-residential building was dragged down by the sharp drop in the construction of power plants. Public outlays declined to the lowest level since November 2006 as government agencies felt the budget cuts.

Mortgage costs were at a record low and helped the residential real estate market to recover. Economists forecast an improvement in housing in 2013. They see growth rates and construction to remain strong in the remaining months of the year.

The Bloomberg survey showed estimates ranging from a drop of 0.7 percent to a gain of 1 percent. It followed the initially reported 0.1 percent gain in November and 0.9 percent advance in December.

A report from the Commerce Department showed consumer spending increased in January as incomes dropped the most in 20 years. It showed that most households were weathering the payroll tax increase. Household purchases make up around 70 percent of the economy. It went up 0.2 percent after a 0.1 percent increase the previous month. Incomes dropped 3.6 percent that sent the saving rate down to its lowest level since November 2007.

The Institute for Supply Management released its factory index report that showed a reading of 54.2 in February, compared to 52.5 in January. Economists estimated reading of 52.5 according to the survey made by Bloomberg.

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