Construction Spending Edges Up in June

Construction spending edged up 0.2 percent in June as increases in private nonresidential construction outweighed continuing declines in private residential and public construction spending, the Associated General Contractors of America reported in an analysis of new Census Bureau data. The construction trade association's chief economist, Ken Simonson, predicted further imbalances in spending, with further cuts in public spending likely to offset most or all of the gains in private investment.

“Private nonresidential construction is rebounding, thanks to renewed investments in power, manufacturing, and warehousing and distribution facilities,” Simonson said. “A small rise in homebuilding also helped overall spending rise for the third month in a row, although decreases in multifamily and residential improvements pulled down total private residential construction by 0.3 percent. Meanwhile, public construction shrank 9.6 percent since June 2010, and appears headed down further.”

Simonson noted that private nonresidential construction jumped 1.8 percent from May to June and that nine of the 11 categories that the Census Bureau breaks out recorded gains for the month. The largest monthly increases were in manufacturing and power construction, both up 4.0 percent; commercial (retail, warehouse and farm) construction, up 3.1 percent; and health care construction, up 2.3 percent.

Simonson remarked that public construction spending dropped 0.7 percent in June, bringing the total decline since March 2009 to 14.3 percent. The two largest public categories have fallen by double-digit rates over the past year: highway and street construction fell 1.6 percent in June and 10.4 percent year-over-year, while educational construction dropped 4.1 percent for the month and 13.0 percent compared with June 2010 levels.

“Cutting public investments in infrastructure and construction will offset recent gains in private sector activity,” said Stephen E. Sandherr, the association’s chief executive officer. “Worse, it will put taxpayers on the hook for even greater expenses down the road as infrastructure deteriorates and costly repairs are required.”