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Construction Spending Nears Decade-Long Low


Construction spending slumped 0.7 percent from $798 billion in December to $792 billion in January, the second lowest seasonally adjusted annual rate since July 2000, the Associated General Contractors of America noted in an analysis of new Census Bureau data.

Association officials noted that nearly every private nonresidential category plunged, offsetting pickups in some residential and public nonresidential segments. They added that since January 2010, construction spending has declined by 5.9 percent.

“These discouraging figures show that millions of construction workers and their firms are still suffering from the economic downturn, despite a year and a half of growth in the overall economy,” said Ken Simonson, the association’s chief economist. “Other than an uptick in the construction of truck terminals and railroad facilities, private sector demand for construction remains extremely low.”

Simonson noted that private nonresidential construction sank 6.9 percent from December and 13.2 percent from January 2010 levels. He added that the figures for public construction were more positive, up 0.1 percent for the month and 2.9 percent for the year, largely thanks to ongoing federal spending for stimulus, military base realignment projects and hurricane prevention and recovery work around New Orleans. He warned, however, that much of this temporary work would dry up later this year. As a result, Simonson predicted that public construction spending was likely to decline in 2012, if not sooner.

Private residential construction appeared to do well in January, Simonson noted. However, he cautioned that the figures may not be as positive as they first appear. He noted that the Census Bureau has now begun to make visible the difference between single-family construction spending—up 0.8 percent for the month but down 4.8 percent year-over-year—and multifamily, which slumped 2.9 percent from December and 20.1 percent from a year ago.

“But ‘residential improvements’ are still hidden in the Census total,” Simonson warned. “This segment supposedly jumped 10.5 percent over the month and shrank 8.7 percent from January 2010; in reality, the final residential figure is likely to be substantially revised.”

Association officials urged leaders of the 112th Congress to act quickly so that federal programs to invest in transportation and water infrastructure do not lapse. Stephen E. Sandherr, the association’s chief executive officer, noted that federal highway, transit and airport funding could expire as early as this weekend, throwing thousands of construction workers out of jobs. “The last thing taxpayers need is the extra cost of adding thousands to the unemployment rolls and the penalties associated with walking away from half-completed construction projects,” Sandherr said.