Construction spending snapped a nine-month string of monthly gains with a sharp decline in January but still rose from year-ago levels, according to a recent analysis of new Census Bureau data by the Associated General Contractors of America.

Association officials cautioned that across-the-board federal spending cuts known as sequestration, which took effect on March 1, along with a possible shutdown of the federal government later this month, could hit construction harder than most sectors and dampen demand for needed projects.

“At first glance, January was a bad month for construction, with a sharp drop in private nonresidential spending, along with small dips in residential and public construction,” said Ken Simonson, the association's chief economist. “However, the January figure was higher than the year-ago level. Moreover, steep upward revisions today in the preliminary numbers for November and December suggest January may ultimately prove to have been positive, as well.”

Construction put in place totaled $883 billion in January, down 2.1% from the December total, which was marked up from an initial estimate of $885 billion to $903 billion on the basis of new data on power and energy construction. The January 2013 total was 7.1% higher than in January 2012.

Private residential construction spending was flat for the month and up 22% year-over-year. Private nonresidential spending slumped 5.1% for the month but climbed 4.0% year-over-year. Public construction spending dropped 1.0% for the month and 3.0% over 12 months.

“Once more complete data is available, power construction should prove to be a strong category in 2013, along with manufacturing, multifamily and—at least in the first half of the year—single-family construction,” Simonson said. “But public construction, which has declined year-over-year for 28 straight months, appears to be headed still lower.”