Construction spending edged up 0.2% 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 earlier this week 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%. Meanwhile, public construction shrank 9.6% since June 2010, and appears headed down further.”
Simonson noted that private nonresidential construction jumped 1.8% 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%; commercial (retail, warehouse and farm) construction, up 3.1%; and health care construction, up 2.3%.
Simonson remarked that public construction spending dropped 0.7% in June, bringing the total decline since March 2009 to 14.3%. The two largest public categories have fallen by double-digit rates over the past year: highway and street construction fell 1.6% in June and 10.4% year-over-year, while educational construction dropped 4.1% for the month and 13.0% 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.”