Total construction spending edged up 0.4 percent between July and August to $812 billion, driven by increases in public construction activity including stimulus and base realignment projects, according to an analysis of new Census Bureau data released today by the Associated General Contractors of America. Association officials cautioned, however, that private residential and nonresidential spending both continued to shrink as private-sector demand for construction remains extremely weak.
“Federal investments from the stimulus and other programs are protecting some construction workers from a devastating downturn in private construction activity,” said Ken Simonson, the association’s chief economist. “But the industry will continue to be at risk of greater economic hardships as long as private demand for construction continues to shrink.” Private residential construction dropped 1.7 percent during the past year while private nonresidential spending dropped 24 percent, Simonson noted.
The economist added that all 11 categories of private nonresidential construction in the Census Bureau’s press release had declined from a year earlier, most by double-digit percentages. Even private power construction, which was doing well earlier this year, fell 2.9 percent from July in seasonally adjusted terms and 15.5 percent year-over-year. Simonson added that single-family construction is up 4.2 percent year-over-year but has been dropping since April, and that multi-family construction is down a “devastating” 52 percent over the past 12 months.
While public construction spending increased by 2.5 percent between July and August, it is still down 1.0 percent from August 2009 to August 2010, driven largely by declines in state and local tax revenue, Simonson noted. Stimulus funds appear to have lifted public housing (up 33 percent from August 2009 to August 2010), sewage and waste disposal (up 19 percent), water supply construction (up 5.2 percent) and highway and street construction (up 0.9 percent), Simonson observed. Reconstruction work around New Orleans helped conservation spending rise 18 percent, the economist also suggested.
In contrast, public educational construction, which is almost entirely funded from state and local revenues, slumped 13 percent. Stephen Sandherr, chief executive officer of the construction association, said the new spending data show that stimulus funds for construction have been turning into projects at an increasing rate. But he cautioned that temporary investment measures like the stimulus were likely to expire before private sector investments increase. “Without action soon on long-term infrastructure programs like the highway and transit bill, our industry faces the severe risk of tumbling into another downturn,” Sandherr said.