Plunging Nonresidential Spending Puts Construction Volume Near Decade-Long Low

Construction spending slumped 0.7% 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 today 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. Since January 2010, construction spending has declined by 5.9%.

"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% from December and 13.2% from January 2010 levels. He added that the figures for public construction were more positive, up 0.1% for the month and 2.9% for the year, largely thanks to ongoing federal stimulus spending, 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% for the month but down 4.8% year-over-year—and multifamily, which slumped 2.9% from December and 20.1% from a year ago.

"But 'residential improvements' are still hidden in the Census total," Simonson warned. "This segment supposedly jumped 10.5% over the month and shrank 8.7% 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.

View Census Bureau data.

 

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