Spending Shows Slight Increase, But Economist Still Expects Declining
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 placethe concept measured by the Census
Bureauand 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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