Construction Spending Reaches Highest Level since December 2009

Construction spending in June rose to a 2-1/2 year high as double-digit percentage increases in private residential and nonresidential construction more than offset an ongoing downturn in public construction, according to an analysis of new federal data released by the Associated General Contractors of America. Association officials said they expect the disparity between private and public construction is likely to persist and urged policy makers to put more funding into infrastructure projects.

“The June spending gains come on top of upward revisions to May and April totals, reinforcing the notion that private construction is now growing consistently,” said Ken Simonson, the association's chief economist. “Even more encouraging, the improvement is showing up in a wide range of residential and nonresidential categories.”

Simonson noted that total construction spending gained 0.4 percent for the month and 7.0 percent year-over-year. Private nonresidential spending climbed for the fourth consecutive month and was 14 percent higher than in June 2011. Residential construction increased 1.3 percent for the month and 12 percent year-over-year, with new multifamily construction soaring 3.4 percent and 49 percent, respectively, and single-family homebuilding up 3.0 percent and 19 percent.

The construction economist said that five of the 11 private nonresidential categories in the Census Bureau's monthly report registered double-digit percentage gains in spending from June 2011 to June 2012: power and energy construction (including oil and gas-related projects), 26 percent; hotels, 26 percent; manufacturing and educational, 19 percent apiece; and transportation (mainly trucking and rail facilities), 17 percent. There were also 7 percent year-over-year increases in health care, commercial (retail, warehouse and farm) and office construction.

Public construction spending appears to have stabilized in recent months but the June 2012 total was 3.7 percent less than a year earlier, Simonson noted. He said only two of the Census Bureau's 13 public categories posted year-over-year increases.

“Private nonresidential and multifamily construction should continue to grow in the second half of 2012 and beyond,” Simonson predicted. “Single-family homebuilding also should top last year's figures, although progress may not occur every month. As a result, total construction spending in 2012 will be positive for the year for the first time since 2007 even though public construction will remain in the doldrums.”

Association officials said construction growth will remain unbalanced, however, unless lawmakers enact more funding for essential water, wastewater and other infrastructure projects.
“Although Congress has kept highway spending from falling, other types of infrastructure, including our aging water systems, need attention,” said Stephen E. Sandherr, the association's chief executive officer. “There is nothing to be gained from letting our infrastructure deteriorate further.”