Construction Spending Inches Up In April with Gains in Private Nonresidential Segment
June 1, 2011

Construction spending inched up for the second straight month in April, 0.4 percent – following downward revisions to the March spending figures – due to increases in private nonresidential and home-improvement spending, the Associated General Contractors of America (AGC) reported today in an analysis of new Census Bureau data. Association officials noted, however, that the gains were tempered by sluggish homebuilding and declining levels of public investment in construction.

“Overall economic conditions seem better than they have been for several years, which normally leads to well-rounded construction growth,” says Ken Simonson, AGC chief economist. “But these figures may be deceptively positive, masking weakening public sector demand and still-weak demand for residential construction.”

Simonson notes that the April results were boosted by a modest half-percent rise in private nonresidential construction and a deceptively large 3.1 percent leap in private residential spending. However, the residential growth was attributable to a 7.6 percent jump in the “improvements” category, a number the Census Bureau frequently revises down in later months, as it did in March. The economist cautioned that the figures from more reliable residential categories - new single- and multi-family construction - declined by 1.0 percent and 0.1 percent, respectively.

Simonson notes that private nonresidential spending also was uneven. The largest category, power construction, grew 3.2 percent, and there were increases of 4.7 percent for communication construction and 0.8 percent for private health care construction. But there were decreases of 1.3 percent in commercial construction (retail, warehouse and farm), 1.0 percent in manufacturing construction, and 3.2 percent in private office construction.

Simonson says the steep drop in public construction, which fell for the seventh straight month in April - by 1.9 percent - and shrank to a four-year low, was cause for concern. “It appears that federal stimulus and military base realignment work are tapering off, while state and local budgets for infrastructure have been shrinking for some time,” he says. The four largest public categories, accounting for three-fourths of public construction spending, all declined in April: highway and street construction, -1.6 percent; educational, -2.7 percent; transportation facilities, -3.8 percent; and sewage and waste disposal, -2.5 percent.

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