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Construction Spending Hits Three-Year High in September as Solid Gains in Private Residential, Nonresidential Categories Outweigh Public Downturn

Construction spending in September climbed to a nearly three-year high at an annualized rate of $852 billion, as increased spending on houses, apartments and private nonresidential projects outweighed a continuing downturn in public construction, according to an analysis of new federal data released today by the Associated General Contractors of America. Association officials said they expect both the public and private trends to continue despite the disruption caused by Hurricane Sandy.

“It is heartening to see the growth in total spending, but the progress remains fragile and fragmentary,” said Ken Simonson, the association’s chief economist, noting that construction spending had dipped the previous month and that spending in several categories remains lower than in September 2011. “In the wake of the massive losses from this week’s storm, many construction priorities will be reordered, but overall private and public spending patterns are likely to stick unless federal and state lawmakers devote more funds to construction.”

Simonson noted that total construction spending rose 0.6 percent for the month and 7.8 percent from September 2011 to September 2012, bringing the total to the highest level since October 2009. Private residential spending accelerated, increasing by 2.8 percent compared with August and 21 percent during the past 12 months. Private nonresidential construction, however, inched down 0.1 percent for the month, but remains up 8.8 percent for the year. Public construction shrank 0.8 percent in September and 4.2 percent year-over-year.

Within the private sector, all three residential categories did well. New single-family construction increased 3.9 percent for the month and 26 percent over 12 months. New multi-family construction rose 1.3 percent for the month and 49 percent since September 2011. Improvements to existing residential structures—a category likely to get a large boost from storm reconstruction—climbed 2.0 percent in September and 12 percent over the year.

Among private nonresidential categories, the largest—power construction, which includes oil, gas and other energy projects—rose 1.1 percent for the month and 20 percent over 12 months. Manufacturing construction was up 3.8 percent in September and 1.3 percent year-over-year. Commercial construction, comprising retail, warehouse and farm structures, dropped 3.8 percent in September but posted a 12-month gain of 4.4 percent.

Public construction fell for the third straight month, with declines in the two dominant categories. Highway and street construction spending decreased 1.6 percent in September and 2.4 percent year-over-year, while educational construction spending slipped 0.8 percent and 6.9 percent, respectively.

Stephen Sandherr, chief executive officer for the construction trade association, called on public officials to make available extra funds for rebuilding. “Lawmakers cannot merely raid one part of their construction budgets to make urgent repairs at a time when funding for infrastructure is already inadequate,” he said. “Stabilization and restoration of the hard-hit infrastructure in the Northeast should supplement, not crowd out, long-needed projects elsewhere and in that region and nationwide.”

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