Construction Spending Lowest Level in 7 Years, Driven By Nonresidential and Public Construction Declines
Federal Construction Investments are Lone Bright Spot in Latest Spending Report, Yet Good News is Offset By 'Disruptive' Expiration of Federal Transportation Program
Construction spending in January fell by $5.5 billion to $884 billion, its lowest level since June 2003, according to an analysis of new federal figures by the Associated General Contractors of America. Declining investments in private-sector non-residential construction and public construction at all levels of government drove the 0.6 percent decline, the association's chief economist Ken Simonson noted.
"What's clear from this data is that the downturn in nonresidential construction spending is far from over," Simonson said. "Federal funding for construction is one of the few crutches propping up a deeply wounded construction industry."
Simonson noted that private nonresidential construction spending declined by 2.1 percent between December and January, and by 20 percent over the past year. Power construction was the only private nonresidential construction category to increase over the past year, by 16 percent, while most other categories declined by double digits, Simonson added.
Simonson noted that two major categories of federally-driven transportation spending, public highway & street construction and other transportation construction, increased by 6 and 18 percent, respectively. In addition, direct federal construction spending increased 1.9 percent in January and 13 percent over the past 12 months to a record $31 billion.
"Federal funding has been giving contractors the lifeline they need to stay in business," Simonson observed. Many construction jobs are now at risk, however, because the federal transportation program expired last night. Without federal funds, total spending on highway and transportation projects is sure to plummet this year, Simonson cautioned.
"Even a temporary halt to the federal transportation program will have a disruptive impact on an industry coping with staggering declines in construction activity," the economist said. "With federal work coming to a halt and many states wondering whether to put their transportation programs on hold, construction layoffs and closures are likely to accelerate."
Association officials urged Congress to act quickly to renew the federal transportation program. "Thousands of construction workers are counting on Congress to fix this problem before they and the entire economy are made to suffer," said Stephen E. Sandherr, the association's chief executive officer.