ROADS/BRIDGES: Construction spending drops for second straight month

Highway and street construction down slightly, but up 3.6% year-over-year

News AGC of America October 02, 2012
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Construction spending declined between July and August to an annualized rate of $837 billion, but increased compared to August 2011, according to an analysis of new federal data released Oct. 1 by the Associated General Contractors of America. Association officials noted that growing demand for residential, lodging and education construction in particular offset drops in public construction spending.


“The construction industry has definitely lost some of the momentum it had earlier this year,” said Stephen Sandherr, the association’s chief executive officer, noting that construction spending has now declined for two months in a row. “With the exception of the lodging sector, many businesses are retreating from the levels of construction spending we saw in the spring and early summer.”


Sandherr noted that total construction spending declined 0.6% for the month but was up 6.5% from August 2011 to August 2012. Private residential spending continues to strengthen, increasing by 0.9% compared to July and up 17.8% during the past 12 months. Private nonresidential construction, however, declined by 1.7% for the month, but remains up 7.2% for the year. Public construction slid further, declining 0.8% in August and 3.5% year-over-year.


Public construction continues to decline as local and state governments struggle to balance budgets and one-time federal programs like the Base Realignment and Construction (BRAC) and stimulus programs wind down, Sandherr noted. He added that highway and street construction spending inched down 0.6% in August but was up 3.6% year-over-year.


Sandherr said construction activity was likely to stagnate until Congress and the administration can agree on spending and tax rates for next year and beyond. “Businesses aren’t going to make investments in new construction projects until Washington figures out how to avoid the looming fiscal cliff and gives employers some certainty.”


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