Nonresidential Construction Continues to Fall

Spending on nonresidential construction activity tumbled 1.5 percent in October, seasonally adjusted, to the lowest annual rate since July 2007, according to a new analysis of Census Bureau data conducted by the Associated General Contractors of America. The data showed that nonresidential construction spending slumped to $652 billion, an 11 percent decline compared to October 2008, the association added.

“Even formerly robust construction segments, such as manufacturing and power, have run out of steam,” says Ken Simonson, the association’s chief economist, noting that spending on both categories of construction dropped more than 2 percent from September. “Worse, the impacts of the stimulus have been more limited and temporary because of needless delays and red tape.”

Private and public nonresidential spending both dwindled in October, offsetting a 4.2 percent jump in residential construction and leaving total construction spending virtually unchanged from September’s total. Private nonresidential construction shrank 2.5 percent for the month and 21 percent compared with October 2008. Public nonresidential spending slipped 0.4 percent in October but was up 3.7 percent from the year-ago month, according to the report.

Simonson notes that developer-financed categories, including private lodging, office and commercial – retail, warehouse and farm – fell between 2 and 6 percent for the month and 37 to 45 percent over the past 12 months. The economist adds that while the largest public category, highway and street construction, was up 4.7 percent compared with October 2008, it slipped 0.3 percent between September and October.

“Highway and street construction clearly got a big boost from the stimulus; unfortunately many of those projects already are beginning to wind down,” Simonson says. “Without action on new highway and transportation legislation, road and transit builders are likely to suffer further declines.”