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Jan. 8, 2007: AGC Economist Cites Strong Nonresidential Gain Despite Residential Slippage

January 8, 2007
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WASHINGTON - "I must point out there was lots of good news hidden" in the "seemingly gloomy construction spending report" from the U.S. Census Bureau, said Ken Simonson, chief economist for the Associated General Contractors of America (AGC). Simonson was commenting on the January report that showed the value of construction put in place in November totaled $1.184 trillion at a seasonally adjusted annual rate, down 0.2 percent from the upwardly revised October total.

"Nonresidential spending showed a strong 1.2 percent gain in November, even after the October figure was revised from a small loss to a 1.1 percent gain," Simonson observed. "Meanwhile, residential construction spending shrank again in October by 1.6 percent, bringing the cumulative decline to 11 percent since peaking last March.

"There has been no letup in the torrid pace of private nonresidential spending growth," Simonson stated. "For instance, lodging construction - mainly hotels and resorts - jumped 4 percent in November and was up 71 percent from the November 2005 level. Electric power construction charged ahead 4 percent in November and was 18 percent higher than a year ago. Manufacturing construction had a 1 percent gain for the month and was 11 percent ahead of the year-ago level. Health care construction, mainly hospitals, gained 0.4 percent for the month and 20 percent compared to November 2005. The diverse commercial sector, with strong gains in multi-retail and warehouse components, tacked on 1 percent in November and 11 percent compared to the year-ago month.

"The two major public categories performed well in November," Simonson noted. "Highway and street construction gained 0.4 percent for the month and 14 percent compared to November 2005. Education spending climbed 2 percent for the month and 6.6 percent from a year earlier. Total public construction rose 1 percent in November and was up 11 percent over the November 2005 level.

"A closer look at the private residential totals shows new multifamily construction gained 1 percent in November and 16 percent compared to November 2005, while improvements rose 0.6 percent and 6.7 percent," Simonson pointed out. "But those numbers were swamped by declines of 3.1 percent and 20 percent for new single-family construction.

In 2007, Simonson predicted, "Energy- and power-related construction, hotels, hospitals, and rental housing will all perform well, while single-family and condo construction will sink the totals."

Publication date: 01/08/2007

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