Increase in public spending outweighs 0.9% drop in private construction activity to boost overall construction spending between February and March
Increases in public sector construction spending, driven by stimulus funds, helped boost total construction activity by almost $2 billion between February and March, according to a new analysis of federal spending figures released by the Associated General Contractors of America. The figures show that the stimulus has gone from slowing declines in construction spending to contributing to increases, the association noted.
“If it weren’t for public investments in infrastructure and construction, this industry would be in free fall,” said Ken Simonson, the association’s chief economist. “Fortunately, the stimulus is now helping rebuild a construction industry devastated by relentless declines in private sector activity.”
Simonson noted that the new Census Bureau figures show construction spending at an annualized rate of $847.3 billion, an increase of 0.2% from $845.5 in February. While private sector construction spending still dominates the market, it declined 0.9% between February and March, from $555.7 to $550.8 billion. The largest declines came in communications (12.1%), lodging (4.6%) and power (3.8%) construction, Simonson added.
Public sector construction, meanwhile, increased 2.3% from $289.9 to $296.5 billion during the same timeframe. The largest increases came in publicly funded power (23.7%), transportation (12.4%) and water supply (5.9%) construction. Simonson noted that these areas and others showing increases received significant funding from last year’s stimulus law.
Association officials cautioned that the increases in construction spending were unlikely to last once the stimulus runs its course. They noted that high office and retail vacancy rates, and underutilized manufacturing capacity indicate private sector construction will continue to decline through at least the end of the year. They added that cash-strapped state and local governments will not be able to broadly increase capital programs until at least 2012.
“With no transportation bill, no aviation legislation and no water trust fund, the only thing waiting for this industry after the stimulus is a funding cliff,” said Stephen Sandherr, the association’s CEO. “If things don’t change soon, all the stimulus will have been was a really expensive way to delay hardships and layoffs for thousands of construction workers.”