U.S. construction spending increased by 0.3 percent in June, recovering from a slight drop in May, according to monthly statistics released by the U.S. Census Bureau on Aug. 1.
Total spending increased to a seasonally adjusted annual rate of $1.217 trillion from May’s estimate of $1.213 trillion. Total spending for June 2006 is 6.8 percent above the June 2005 numbers.
Ken Simonson, chief economist for the Associated General Contractors of America (AGC), credits private nonresidential and public construction with contributing to the boost in overall spending. Since April, both categories have increased, he says.
In June, nonresidential construction rose 2.7 percent and public construction rose 0.8 percent, according to the Census Bureau’s statistics.
Private residential construction, however, fell 1 percent.
Simonson says he expects the trends of falling residential spending and strong spending in the private nonresidential and public categories to continue.
“There are many strengths on the private nonresidential side,” he says. “For instance, manufacturing spending surged 8 percent for the month and 24 percent for the first half of 2006 compared to January-June 2005.”
Simonson also points out increases in spending for multi-retail buildings, lodging, transportation facilities and power plants, while adding that private single family construction fell 2.1 percent in June, nearly offsetting gains in other categories.
“I expect to see more of the same for the rest of the year,” he says. “As builders work through current backlogs of sold but not-yet-built houses, they will curb new construction sharply. On the private nonresidential side, manufacturing, freight and passenger transportation, oil, gas, and alternative energy projects, lodging and hospital markets should all keep contractors busy. Public construction should be helped initially by higher state budges in the fiscal year that began in July for most states, but higher materials costs will limit the number of contracts that state and local governments can afford.”