Construction spending slips overall

By Tom Stundza -- Purchasing, 4/2/2008 9:44:00 AM

Construction spending slipped 0.3% in February to a seasonally adjusted annual rate of $1.12 billion, the Census Bureau reports. The drop was the fifth straight monthly decline.

An analysis prepared by Kenneth D. Simonson, chief economist of the Associated General Contractors of America, shows that spending in the first two months of 2008 was 2.6% lower than in January-February 2007. Residential construction sagged 0.9% for the month and 20% for the year. Private nonresidential spending inched down 0.1% in February but was up 16% for the two months.

Public nonresidential spending rose 0.5% and 6.6%. Growth in some categories held steady in the first two months of 2008 or even accelerated from 2007, while others slowed markedly. Educational construction rose 15% for the two months, compared to 14% from 2006 to 2007; power, 30% vs. 27%; manufacturing, 30% vs. 10%; transportation facilities, 14% vs. 16%; lodging, 49% vs. 65%. In contrast, commercial (retail, warehouse and farm) rose 1.2% YTD vs. 13% in 2007; highway, 3.9% vs. 7.0%; office, 8.7% vs. 19%; health care, 4.2% vs. 14%. Among private residential categories, new single-family construction fell 33% in January and February vs. 27%; new multi-family, -20% vs. -7.5%; and improvements, +10% vs. +0.4%.

Simonson says “the outlook for highway construction appears to be worsening. Of 176 respondents to a March survey of highway contractors, chapter executives and some state departments of transportation, 77% said there has been “a reduction in the number of contracts that are being bid by your state DOT over the past year.” Half said their “state had problems in providing the match to receive Federal funds” and nearly half said “the reduction in the number of contracts being bid resulted in you laying off workers.”