September 4, 2009

Decline in U.S. non-residential construction sparks call for quicker stimulus rollout

WASHINGTON

Downturns in multi-family construction and both private and public non-residential construction swamped a strong upswing in single-family homebuilding in July, according to an analysis of federal construction spending data provided by a leading construction economist.

That analysis of U.S. Census Bureau data released Sept. 1 shows that total construction spending fell 0.2 per cent, seasonally adjusted, from a downwardly revised June total.

“We know from contractors’ reports that stimulus money is beginning to flow, but what should be a torrent by now is only a trickle in most categories,” said Ken Simonson, chief economist for the Associated General Contractors of America.

He noted, for example, that public non-residential spending slipped 0.8 per cent from June to July as cutbacks in state and local government budgets offset federal stimulus dollars.

The only significant exception was in water supply projects, where spending increased 3.7 per cent, following a 6.8 per cent jump in June.

Private non-residential spending fell for the fifth month in a row, slumping 1.2 per cent in July, after tumbling 2.2 per cent the month before, Simonson added. Losses were most acute for developer-financed categories with lodging down 8.4 per cent for the month and 35 per cent compared to July 2008; office down 1.7 per cent and 26 per cent; and commercial (retail, wholesale and farm), down 1.7 per cent and 35 per cent, respectively. The only private categories that exceeded the July 2008 level were manufacturing construction, which rose 0.9 per cent for the month and 47 per cent over 12 months; and power construction, down 0.8 per cent in July but up 10 per cent from a year earlier.

“Given that private construction will continue shrinking for several more months, public agencies charged with spending stimulus funds on construction must do so as promptly as possible,” Simonson said.

One bright spot in the census report was new single-family construction spending, which surged 7.0 per cent in July, following a 3.1 per cent gain in June. Nevertheless, this category remained 45 below the year-ago level. Meanwhile, new multi-family construction plunged 3.3 per cent for the month and 37 per cent year-over-year.

“Contractors depending on bank-financed developments for work should expect further pain this year,” Simonson concluded. “As a recent Federal Reserve survey showed, banks are keeping a tight lid on real-estate lending.”

-DCN News Services

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