Construction Spending Rebounds In April

According to the most recent figures from the Associated General Contractors of America, construction spending rebounded strongly in April, with an increase of 2.7 percent from March to a seasonally adjusted annual rate of $869 billion.

The association notes that the gains were primarily driven by private residential construction (up 4.4 percent) and public construction (up 2.4 percent), but that private nonresidential also increased significantly (up 1.7 percent).

“The stimulus is clearly driving one of the biggest increases in construction spending the industry has experienced in a long time,” says Ken Simonson, chief economist for AGC. “Once you look beyond the stimulus, however, these figures show how uneven and fragile the construction recovery remains.”

Simonson notes that the stimulus drove significant increases in a range of public construction categories.

Private nonresidential spending was boosted by strong gains in private power construction ($3.9 billion, 5.2 percent for the month); manufacturing ($1.5 billion, 2.7 percent); and communication ($1.3 billion, 7.3 percent). Meanwhile, developer-financed categories, which are plagued by high-vacancy rates and tight credit conditions, continue to tumble. Private lodging construction rose 0.8 percent for the month, but was down 61 percent compared to April 2009; commercial (retail, warehouse and farm) was down 2.9 percent and 37 percent; and private office was down 1.7 percent for the month and 36 percent for the year.

Private residential construction figures were also mixed, Simonson adds. New single-family construction climbed 3.4 percent for the month and 29 percent year-over-year, and improvements to existing single- and multi-unit construction rose 6.3 percent and 4 percent from a year earlier. But new multi-family construction—condos and rental buildings, which are developer-financed —slumped 1.9 percent in April and 57 percent compared to a year ago.

“Assuming the economy continues to expand, privately-funded construction should experience a rebound starting in 2011,” Simonson notes. “But for now stimulus funding remains the main source of support for nonresidential contractors.”