Construction Spending Inches Up in April

The construction of private nonresidential segments improves during April 2011.

June 2, 2011
CDR Staff
Forecasts & Statistics

Following the release of monthly statistics from the U.S. Census Bureau, the Associated General Contractors of America (AGC), reports construction spending increased by a modest 0.4 percent in April, following downward revisions to the March spending figures. The AGC attributes the improvement to an increase in private nonresidential and home improvement spending.

The AGC, in commenting on the Census Bureau’s monthly data, adds that the gains were tempered by sluggish homebuilding and declining levels of public investment in construction.

“Overall economic conditions seem better than they have been for several years, which normally leads to well-rounded construction growth,” says Ken Simonson, AGC’s chief economist. “But these figures may be deceptively positive, masking weakening public sector demand and still-weak demand for residential construction.”

Simonson notes that the April results were boosted by a modest half-percent rise in private nonresidential construction and a deceptively large 3.1 percent leap in private residential spending. However, residential growth was attributable to a 7.6 percent jump in the ‘improvements’ category, a number the Census Bureau frequently revises down in later months, as it did in March. Simonson cautions that the figures from more reliable residential categories—new single- and multi-family construction—declined by 1.0 percent and 0.1 percent, respectively.

In an AGC release, Simonson adds that private nonresidential spending also was uneven. The largest category, power construction, grew 3.2 percent, and there were increases of 4.7 percent for communication construction and 0.8 percent for private health care construction. But there were decreases of 1.3 percent in commercial construction, 1.0 percent in manufacturing construction and 3.2 percent in private office construction.

The steep decline in public construction, which fell for the seventh straight month in April—by 1.9 percent—and shrank to a four-year low, is a cause for concern, according to Simonson. “It appears that federal stimulus and military base realignment work are tapering off, while state and local budgets for infrastructure have been shrinking for some time.”. The four largest public categories, accounting for three-fourths of public construction spending, all declined in April: highway and street construction, down 1.6 percent; educational,down-2.7 percent; transportation facilities, down3.8 percent; and sewage and waste disposal, down2.5 percent.

In reviewing the numbers, officials with the AGC say the mixed results show the importance of enacting long-term infrastructure funding bills for transportation, wastewater and drinking water, as well as having a tax and regulatory environment that encourages private investment in structures.

“Economic recovery will remain sluggish and uneven unless construction and the sectors that depend on it share in growth,” says Stephen Sandherr, AGC’s CEO.