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Still Signs of Strength in Construction

Nonresidential construction spending has been flat for the past two months but still has many areas of strength, says Ken Simonson, chief economist for The Associated General Contractors of America.

by Staff
December 4, 2006
2 min to read


Nonresidential construction spending has been flat for the past two months but still has many areas of strength, says Ken Simonson, chief economist for The Associated General Contractors of America.

According to the Dec. 1 report from the Census Bureau Washington, construction spending in October totaled $1.18 trillion at a seasonally adjusted rate, down 1 percent from September. At first glance nonresidential spending appears to have leveled off after growing strongly for more than a year, but Simonson pointed out that the subcategories tell another story.
“For instance, lodging construction – mainly hotels and resorts – leaped 8 percent in October and was up 70 percent from the October 2005 level,” he said.
“The multi-retail category, covering shopping centers and malls and general merchandise stores, rose 1.3 percent in October and 36 percent compared to the year-ago month. Private electric power construction was up 3.3 percent for the month and 26 percent relative to October 2005. Private hospital construction gained 0.5 percent and 23 percent respectively. But private nonresidential construction overall slipped 0.7 percent for the month, dragged down by declines of 3.1 percent in manufacturing, 1.6 percent in office and 1.4 percent in commercial construction.”
Highway and street construction spending was up slightly for the month and rose 16 percent from a year ago, due to higher materials costs and the ongoing boost from federal funding authorized in 2005, he said. Total public construction was up 0.8 percent for the month and 16 percent from 2005.
Residential construction spending dropped 1.9 percent in October, bringing the cumulative decline to 10 percent since peaking last March. There, too, Simonson found some good news. "New multi-family construction climbed 1.6 percent in October and 15 percent compared to October 2005, while improvements rose 1.5 percent and 4.9 percent,” he said. “But those numbers were swamped by declines of 3.9 percent and 17 percent for new single-family construction.
"Going forward, I think there is still plenty of life left in hotel, hospital, energy-related, and public spending," Simonson concluded. "But single-family home construction will remain in free-fall for several more months."

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