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USGNN Original StoryConstruction Spending Shows Slight Increase, But Economist Still Expects Declining Conditions
May 5, 2009

Construction spending in March was estimated at a seasonally adjusted rate of $969.7 billion, a .03 percent increase (+/-1.3 percent) from February, according to data released by the U.S. Census Bureau. The figure, however, is still down 11.1 percent (+/- 1.6 percent) compared to March 2008.

During the first three months of the year construction spending amounted to $209.5 billion, 10.9 percent (+/-1.4 percent) below the $235.2 billion for the same period last year.

Private non-residential spending in March was at a seasonably adjusted annual rate of $402.6 billion, 2.7 percent (+/- 1.4 percent) above the revised February estimate of $392.0 billion.

Ken Simonson, chief economist for the Associated General Contractors of America (AGC), said that given the declining office and hotel vacancy rates, continued difficult retail conditions and ongoing challenges with the credit markets, it is hard to imagine that many new office, hotel or retail projects will be starting anytime soon.

"And, unfortunately, even where there may be demand, financing these projects right now is, at best, difficult. In short, despite today's data, nonresidential construction activity is likely to decline significantly over the coming months," Simonson said.

He also pointed out that stimulus money has not yet turned into construction put in place—the concept measured by the Census Bureau—and that while thousands of projects have been announced, which could be good news for the glass industry, those projects are not likely to show up as construction spending until May data is released in early July.

"The stimulus legislation will provide a significant boost to building construction-about $30 billion over the next two years or so, by AGC's estimate. But that won't be enough to offset the steep decline that is already under way in private and state- and local-funded projects such as retail, office and school construction," says Simonson. "Even with stimulus funding, I expect total nonresidential spending to decline anywhere from 3 to 9 percent in 2009, with breakeven at best in 2010."

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