Total construction spending increased 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 last week by the Associated General Contractors of America. AGC officials cautioned, however, that private residential and nonresidential spending both continued to shrink as private-sector demand for construction remains weak.
Private residential construction decreased 1.7 percent during the past year while private nonresidential spending plunged 24 percent, with all 11 categories of private nonresidential construction declining year over year, mostly by double-digit margins.
“Federal investments from the stimulus and other programs are protecting some construction workers from a devastating downturn in private construction activity,” said Ken Simonson, AGC’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.”
Even private power construction, which posted solid numbers earlier in 2010, fell 2.9 percent from July in seasonally adjusted terms and 15.5 percent year over year. Simonson said 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 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 percent from August 2009 to August 2010, driven largely by declines in state and local tax revenue. Stimulus funds appear to have lifted public housing, which rose 33 percent from August 2009 to August 2010, sewage and waste disposal jumped 19 percent, water supply construction rose 5.2 percent and highway and street construction grew 0.9 percent. Reconstruction work around New Orleans helped conservation spending rise 18 percent. However, public education construction, which is almost entirely funded from state and local revenues, dropped 13 percent.
Stephen Sandherr, AGC CEO, noted that new spending data shows that stimulus funds for construction have been turning into projects at an increasing rate, but 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,” said Sandherr.