Construction spending hits 17-month high in November

Monthly gains in all segments but public; highway spending increased for the 6th straight month but still below 2010

Editorial/Commentary News AGC January 04, 2012
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Construction spending totaled $807 billion in November 2011, the highest level since June 2010, as homebuilding, private nonresidential construction and public construction all increased compared with October, the Associated General Contractors of America (AGC) reported in an analysis of new Census Bureau data. Association officials cautioned, however, that public spending will drop even further in 2012 because of delays in enacting needed infrastructure bills and planned cuts to many federal construction programs.

 

“Several segments of construction appear to be climbing out of a hole,” said AGC’s chief economist, Ken Simonson. “The new year should reinforce recent year-over-year gains in apartment, power, manufacturing and private transportation construction. But November’s upturns in single-family homebuilding and public construction may not be sustainable.”

 

Simonson noted that total construction spending rose 1.2% in November from October and 0.5% from the November 2010 level. Private residential construction posted increases of 2.0% and 3.4%, with gains in single-family, multifamily and residential improvements. Private nonresidential construction spending inched up a negligible amount from October but gained 4.5% compared with November 2010. Public spending rose 1.7% last month but declined 5.3% from a year earlier.

 

The construction economist added that the uptick in private nonresidential construction from November 2010 was widespread, led by manufacturing, up 12.6%; commercial (retail, warehouse and farm), up 12.0%; private educational, up 10.0%; private transportation, up 9.2%; and power (including oil and gas), up 8.4%.

 

Most public construction categories shrank over the past 12 months, although the two largest had mixed results, Simonson observed. Highway spending increased for the sixth straight month, by 1.9%, but was 2.2% below the November 2010 mark. Public educational construction was up 0.5% for the month and 2.8% year-over-year. “Public construction segments face stiff spending cuts in 2012,” Simonson cautioned.

 

Association leaders said planned cuts to a range of federal building and infrastructure construction programs were likely to hurt the construction industry even as private-sector demand finally rebounds. They noted that the federal budget for 2012 includes a more-than-6% cut for construction programs and added that Congress is years late in passing much-needed water, aviation and surface transportation legislation.

 

“If lawmakers don’t act swiftly, they risk undermining a long-awaited recovery for the construction industry that could put tens of thousands of people back to work,” said Stephen E. Sandherr, AGC’s chief executive officer. “These cuts aren’t helping balance the budget, but they are keeping a major segment of our economy in check.”

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