DCN ARCHIVES

May 4, 2010

Public sector spending boosts U.S. construction

Increases in public sector construction spending, driven by stimulus funds, helped boost total U.S. construction activity by almost $2 billion between February and March.

According to an analysis of federal spending figures by the Associated General Contractors of America released Monday, the stimulus has gone from slowing declines in construction spending to contributing to increases.

“If it weren’t for public investments in infrastructure and construction, this industry would be in free fall,” said AGCA’s chief economist Ken Simonson.

“Fortunately, the stimulus is now helping rebuild a construction industry devastated by relentless declines in private-sector activity.”

Construction spending reached an annualized rate of $847.3 billion, an increase of 0.2 per cent from $845.5 in February.

Private sector construction spending still dominates the market, but it declined 0.9 per cent between February and March, from $555.7 to $550.8 billion.

Public-sector construction increased 2.3 per cent, from $289.9 to $296.5 billion, during the same period, with the largest increases in publicly-funded power (23.7 per cent), transportation (12.4 percent) and water supply (5.9 percent) construction.

These areas and others showing increases received significant funding from last year’s stimulus law, Simonson noted.

The increases in construction spending were unlikely to last once the stimulus runs its course, AGCA said, citing high office and retail vacancy rates, and underutilized manufacturing capacity.

“With no transportation bill, no aviation legislation and no water trust fund, the only thing waiting for this industry after the stimulus is a funding cliff,” said AGCA CEO Stephen Sandherr.

“If things don’t change soon, all the stimulus will have been was a really expensive way to delay hardships and layoffs for thousands of construction workers.”

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