Associated General Contractors Say Construction Spending Falls to 10-Year Low in July

The Associated General Contractors of America (AGC), an association for the construction industry, has reported that total construction spending in July 2010 declined to a 10-year low of $805 billion, as investments in construction projects dropped 1 percent from a downwardly revised June total.

In examining Census Bureau data, the AGC notes that the new figures show depressed private sector activity and local and state budget cuts offsetting stimulus-funded construction spending.
In a press release and commentary on the monthly numbers, Ken Simonson, AGC’s chief economist, says, “While the stimulus is funding some vital infrastructure projects, the private sector is too cautious, and state and local governments are too cash-strapped to help.”

“As a result,” he adds, “overall construction spending is at its lowest level in a decade and hundreds of thousands of construction workers are unemployed.”

Simonson notes that the July total was one-third lower than the high-water mark set in February 2006 and down 11 percent in the past 12 months. He adds that in the past year, all 12 private, nonresidential construction categories and 10 of the 14 public categories declined.

Private residential spending in July was 5.5 percent higher than a year before, but has dropped for three straight months since the homebuyer tax credit expired in April, Simonson continues.

Stimulus funds appear to have buoyed public housing, sewage and waste disposal and water supply construction, while reconstruction work around New Orleans helped conservation spending rise 12 percent, Simonson says.
However, he adds, stimulus spending on highways and other transportation facilities is not enough to offset the downturn in state and local budgets, leading these categories to contract by 7 percent and 1 percent, respectively, from year-earlier levels.

Private nonresidential spending dropped 24 percent from July 2009 to July 2010 with double-digit declines in nearly all categories, Simonson remarks. The economist notes that private power construction reached the highest monthly level this year, but manufacturing and developer-financed categories such as office, hotel and retail construction appear to be heading for still less activity.

Stephen Sandherr, AGC’s CEO, says the new spending data and metropolitan area construction employment figures showing construction employment declined in 276 out of 337 metro areas this past year. Sandherr adds that long-delayed federal legislation to invest in aging public infrastructure would provide a needed boost to the construction industry while making the U.S. more economically competitive. “Letting our roads age, our bridges deteriorate and our ports decline is no way to boost our export capacity,” Sandherr said.