ACHRNEWS

Nov. 6, 2006: Nonresidential Building Sets Record Despite Housing Slide

November 6, 2006

WASHINGTON - "Nonresidential construction spending climbed to its 13th consecutive record in September, showing that the homebuilding slide hasn't carried other segments downhill with it," said Ken Simonson, chief economist for the Associated General Contractors of America (AGC). Simonson was commenting on the latest construction spending report from the U.S. Census Bureau.

"Census said that seasonally adjusted construction spending slipped 0.3 percent in September, the third straight monthly drop," Simonson observed. "But nonresidential construction rose 1.1 percent, the 15th monthly rise in a row and the 13th record. Unfortunately, that wasn't enough to offset a 1.1 percent monthly drop in residential construction, which has now fallen 8.2 percent since peaking last March.

"In the first nine months of 2006 combined, overall construction spending was up 6.6 percent from the same period of 2005," Simonson stated. "Private nonresidential construction spurted ahead 17 percent, public construction rose 10 percent, and even residential eked out a 1 percent gain.

"Major private-sector growth categories on a year-to-date basis included lodging (hotels and resorts), up 48 percent compared to January-September 2005; multi-retail (general merchandise stores, shopping centers, and malls), up 37 percent; hospitals, up 25 percent; and manufacturing, up 23 percent," Simonson added. "Multifamily construction was up 18 percent year-to-date, as an upsurge in rental construction has helped offset a recent decline in condo building.

"Of the two big public construction categories, highway and street construction was up 16 percent year-to-date and educational had 7 percent pickup," Simonson pointed out. "Other large components with gains included sewage and waste disposal, up 20 percent, and transportation facilities, up 7.5 percent.

"Nearly all of these categories should continue growing over the next year," Simonson concluded. "I believe the economy is still fundamentally strong, and the housing slide will have limited impacts on other segments. A bigger concern is that fast-rising materials costs have forced cancellation or delay in many projects. Cost increases should moderate in the next few months, but materials costs will still outrun overall inflation."

Publication date: 11/06/2006