WASHINGTON (AP) _ Construction spending dipped by 0.2 percent in February, pulled down by a sharp drop in government

outlays for big public works projects.

The over-the-month decline reported by the Commerce Department Tuesday left the value of all construction projects at a

seasonally adjusted annual rate of $872.2 billion, still a brisk level. The modest drop in February came after construction spending

rose by a solid 2 percent in January.

February’s performance was better than analysts were expecting and suggested that the residential construction and housing

markets continue to be one of the struggling economy’s few bright spots.

Spending on residential projects by private builders went up by 0.6 percent in February from the previous month to a seasonally

adjusted annual rate of $454.4 billion, marking the best month ever on record.

The economy, knocked down by the 2001 recession, has been struggling to get back on sure footing. However, growth since then

has been uneven, with a quarter of strength, followed by a quarter of weakness.

While other parts of the economy _ notably manufacturing have stumbled _ the residential construction and housing markets have

thrived during these economic hard times as low interest rates have helped to motivate buyers and offset other negative forces in the

economy.

Still, Fed Chairman Alan Greenspan believes the red-hot housing market will cool this year, something that would slow consumer

spending, the main force keeping the economy going.

Federal Reserve policy-makers at their March meeting held interest rates at 1.25 percent, a 41-year low, saying they would keep a

close eye on economic developments surrounding the war. Private economists said the Fed would cut rates if the economy were to

show signs of sliding into a new recession.

President Bush wants $726 billion in tax cuts through 2013 to help bolster the economy. The Senate approved a budget outline for

next year, however, that would limit the tax reductions to $350 billion. The House passed the full amount asked by the president.

February’s decline in overall construction spending largely reflected a steep, 2.9 percent drop in government spending on big public

works projects. Spending cuts were reported for schools, industrial buildings, highways and streets, and sewer systems.

Spending by private builders on commercial construction projects, posted a 0.3 percent increase in February, mostly reflecting

stronger spending on hospitals. Spending was cut for office buildings, industrial complexes and hotels and motels.

While the residential side of the construction market has been healthy, the commercial side has sagged. Uncertainties surrounding

the war, lackluster profits and a turbulent stock market have made businesses reluctant to make big investments in capital spending

and hiring, the main forces restraining economic growth.

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