Private Nonresidential Spending Falls for Fifth Straight Month While Homebuilding Surges
Downturns in multi-family construction and both private and public nonresidential construction swamped a strong upswing in single-family homebuilding in July according to an analysis of federal construction spending data provided today by a leading construction economist. That analysis of U.S. Census Bureau data released today shows that total construction spending fell 0.2 percent, seasonally adjusted, from a downwardly revised June total.
"We know from contractors' reports that stimulus money is beginning to flow, but what should be a torrent by now is only a trickle in most categories," said Ken Simonson, chief economist for the Associated General Contractors of America.
He noted, for example, that public nonresidential spending slipped 0.8 percent from June to July as cutbacks in state and local government budgets offset federal stimulus dollars. The only significant exception was in water supply projects, where spending increased 3.7 percent, following a 6.8 percent jump in June.
Private nonresidential spending fell for the fifth month in a row, slumping 1.2 percent in July, after tumbling 2.2 percent the month before, Simonson added. Losses were most acute for developer-financed categories with lodging down 8.4 percent for the month and 35 percent compared to July 2008; office down 1.7 percent and 26 percent; and commercial (retail, wholesale and farm), down 1.7 percent and 35 percent, respectively. The only private categories that exceeded the July 2008 level were manufacturing construction, which rose 0.9 percent for the month and 47 percent over 12 months; and power construction, down 0.8 percent in July but up 10 percent from a year earlier.
"Given that private construction will continue shrinking for several more months, public agencies charged with spending stimulus funds on construction must do so as promptly as possible," Simonson said.
One bright spot in the Census report was new single-family construction spending, which surged 7.0 percent in July, following a 3.1 percent gain in June. Nevertheless, this category remained 45 below the year-ago level. Meanwhile, new multi-family construction plunged 3.3 percent for the month and 37 percent year-over-year.
"Contractors depending on bank-financed developments for work should expect further pain this year," Simonson concluded. "As a recent Federal Reserve survey showed, banks are keeping a tight lid on real-estate lending."
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