Construction spending declined 1.2 percent from September to October, to a seasonally adjusted annual rate of $1.07 trillion, the Census Bureau reported last week. Private residential spending in October dropped 3.5 percent from September, and 24 percent year over year compared with October 2007.
Public spending increased 0.7 percent month over month and 7.4 percent year over year. Office construction rose 1.6 percent from September to October and 8.9 percent year over year compared with 2007.
Seasonally adjusted unemployment rates increased in 38 states and the District of Columbia in October, while five states decreased and seven states were flat according to the Bureau of Labor Statistics.
One positive note for the construction industry was a decline in materials prices. The Institute of Supply Management reported purchasing executives at manufacturing firms listed price decreases in November for aluminum, copper, diesel fuel, steel and stainless steel.
“That is one piece of good news,” Ken Simonson, chief economist for the Associated General Contractors of America said in a conference on the economy last week. “Those materials that soared to record heights: steel, asphalt and diesel fuel, and many other products, with many companies experiencing huge steel surcharges up through August, since then we’ve had a big drop of course in diesel prices, and we’re starting to see steel prices come down. I think they are going to drop much more sharply in 2009, and other materials also should be coming back.
“So this is actually a good time for owners to go ahead with projects. They are getting a rare break in materials prices and they’ll also see a little pullback in labor cost increases compared to what we had in ’07 and a great availability of skilled contractors who are broadening the areas in which they are looking for work and they are ready to work now. I hope that will mean that in ’09 we’ll get a surprise in the upside of there being more owners willing to commit.”