Economist Says June Construction Spending Show Mixed Pattern

According to Census Bureau figures, construction spending in June showed a "mixed pattern." Total spending for the month was $1.093 trillion at a seasonally adjusted rate, a 3-percent decline from May.

Private, non-residential construction increased by 0.2 percent from May and public construction dropped 0.5 percent. For the fourth consecutive month, private residential construction, also declined, but came entirely from "improvements," reported Kenneth D. Simonson, chief economist for the Associated General Contractors. He reported that single- and multi-family construction increased in each month. "Total construction put in place would have risen slightly if not for the downturn in improvements," he said.

For the first half of the year, total spending was 9 percent higher than the first half of last year, with private non-residential spending up 12 percent; public spending was up 7 percent.

Simonson said that despite numbers being a bit "sluggish" recently, there are many indicators that activity will increase the second half of this year and into 2006.

"The report on gross domestic product showed that consumers, businesses and governments are all spending on investment," said Simonson. "The enactment of the highway and energy bills should give a long-term boost to several types of construction."

As far as residential construction goes, Simonson said it is likely to shrink gradually over the next year.

"But there isn't likely to be a crash. Long-term interest rates are still remarkably low and builders remain optimistic, with large backlogs of unused permits."

He added, though, that the biggest worry is still materials costs … "Purchasing managers who responded to an Institute for Supply Management Survey noted price increases for diesel fuel and freight, copper and some types of steel," reported Simonson.

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