Construction Spending Rises 0.4 Percent In November For Third Straight Gain, But
Industry Remains "Fragile," Says AGC Chief Economist
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Power Construction, Residential Improvements Offset Declines in Most Private
Categories; Public Construction Continues to Rise but Change in Congress; State
and Local Budget Woes Augur Downturn Ahead
Construction spending increased by 0.4 percent in November, the third straight
rise in the total, the Associated General Contractors of America noted on
January 3, 2011 in an analysis of new Census Bureau data. Private residential
and public construction each gained 0.7 percent compared with October’s totals,
while private nonresidential construction edged down 0.1 percent.
“It is heartening to see three increases in a row for the total,” said Ken
Simonson, the association’s chief economist. “But most categories showed more of
a seesaw pattern over the past three months, indicating that construction
spending remains fragile at best.”
Simonson noted that the strongest category appears to be power construction,
which has climbed for four consecutive months from a seasonally adjusted annual
rate of $75.7 billion in July to $85.7 billion in November. He added that power
construction will be helped in 2011 by extension of tax credits for building
wind and other renewable power facilities. Residential improvements appear to
have rebounded for the past three months also, up $15 billion since August.
Simonson cautioned, however, that the Census Bureau often makes large
revisions—down or up—to this estimate.
Public construction reached a 16-month high of $318.5 billion, but is likely to
decrease in 2011, Simonson observed. Major federal funding for military base
realignment, Gulf Coast hurricane work and stimulus projects is expected to
taper off in the second half of the year. Meanwhile, the new Congress and many
governors have signaled that they intend to hold down spending on infrastructure
among other categories, the economist noted.
Association officials urged leaders of the 112th Congress, be sworn in on
January 5, 2011, to maintain a commitment to transportation and water
infrastructure. Stephen E. Sandherr, the association’s chief executive officer,
noted that proposed rule changes being considered by the incoming Congress
jeopardize highway, bridge and transit investments. “Deferring needed
improvements to our aging transportation network will undermine business
activity today while saddling future taxpayers with ever-larger maintenance and
repair costs,” Sandherr said.