Stimulus Delays, Lack of Highway Bill Are Adding to Construction Industry Woes Caused by Declining Private-Sector Activity, Industry Economist Notes
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," said 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 to October 2008. Public nonresidential spending slipped 0.4 percent in October but was up 3.7 percent from the year-ago month.
Simonson noted 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 added that while the largest public category, highway and street construction, was up 4.7 percent compared to 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 said. "Without action on new highway and transportation legislation, road and transit builders are likely to suffer further declines."
Other public categories were mixed, Simonson observed. Educational spending climbed 1.1. percent for the month, while sewage/waste disposal and water supply projects, both of which should have benefited from stimulus funding, fell 0.8 percent and 4.9 percent, respectively.
Simonson noted that some stimulus-funded construction projects, such as water and wastewater projects, have been delayed by Buy American restrictions and regulatory delays in some agencies. "Congress passed stimulus with the intent of putting construction workers back on the job as soon as possible. Without quicker action, construction spending will continue to shrivel, and the industry's unemployment rate will exceed the current 18.7 rate."
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