"Construction spending lost momentum in October," Ken Simonson, chief economist for The Associated General Contractors of America (AGC), said recently. Simonson was commenting on the December 1 report from the Census Bureau that showed the value of construction put in place in October totaled $1.178 trillion at a seasonally adjusted annual rate, down 1.0% from the downwardly revised September total.
"Nonresidential spending has been flat for the past two months after growing strongly for more than a year," Simonson observed. "Meanwhile, residential construction spending shrank again in October by 1.9%, bringing the cumulative decline to 10% since peaking last March.
"A closer look at the subcategories shows nonresidential construction still has many areas of strength," Simonson stated. "For instance, lodging construction – mainly hotels and resorts – leaped 8% in October and was up 70% from the October 2005 level. The multi-retail category, covering shopping centers and malls and general merchandise stores, rose 1.3% in October and 36% compared to the year-ago month. Private electric power construction was up 3.3% for the month and 26% relative to October 2005. Private hospital construction gained 0.5% and 23% respectively. But private nonresidential construction overall slipped 0.7% for the month, dragged down by declines of 3.1% in manufacturing, 1.6% in office, and 1.4% in commercial construction.
"The two major public categories edged up in October," Simonson noted. "Highway and street construction gained 0.3% for the month and 16% compared to October 2005. That reflects both higher materials costs and the ongoing boost from the federal highway reauthorization law enacted in August 2005. Education spending rose 0.2% for the month and 6.4% from a year earlier. Total public construction rose 0.8% in October and was up 16% over the October 2005 level.
"Going forward, I think there is still plenty of life left in hotel, hospital, energy-related, and public spending," Simonson concluded. "But single-family home construction will remain in free-fall for several more months."
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