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Construction Spending Sinks To 10-Year Low in July as Investments In Projects Are Now 34 Percent Below February 2006 Peak

Private Sector Caution, Plus Local and State Budget Cuts, Overwhelm Benefits of Stimulus, Construction Trade Association Notes in New Analysis of Spending Data Released by Federal Officials Today

Total construction spending declined to a 10-year low of $805 billion in July, as investments in construction projects dropped 1.0 percent from a downwardly revised June total, the Associated General Contractors of America said today in an analysis of new Census Bureau data. Association officials noted that the new figures show depressed private sector activity, and local and state budget cuts are offsetting stimulus-funded construction spending.

"While the stimulus is funding some vital infrastructure projects, the private sector is too cautious and state and local governments are too cash-strapped, to help," said Ken Simonson, the association's chief economist. "As a result, overall construction spending is at its lowest level in a decade and hundreds of thousands of construction workers are unemployed."

Simonson noted that the July total was one-third lower than the high-water mark set in February 2006 and was down by 11 percent in the past 12 months alone. He added that in the past year, all 12 private nonresidential construction categories and 10 of the 14 public categories declined. Private residential spending in July was 5.5 percent higher than a year before but has dropped for three straight months since the homebuyer tax credit expired in April, Simonson continued.

Stimulus funds appear to have buoyed public housing (up 18 percent from July 2009 to July 2010), sewage and waste disposal (up 11 percent), and water supply construction (up 0.7 percent), while reconstruction work around New Orleans helped conservation spending rise 12 percent, Simonson suggested. He added, however, that stimulus spending on highways and other transportation facilities was evidently not enough to offset the downturn in state and local budgets, leading these categories to contract by seven percent and one percent, respectively, from year-earlier levels.

Private nonresidential spending plunged 24 percent from July 2009 to July 2010 with double-digit declines in nearly all categories, Simonson remarked. The economist noted that private power construction reached the highest monthly level this year but manufacturing and developer-financed categories such as office, hotel and retail construction appear to be heading for still less activity.

Stephen Sandherr, chief executive officer of the construction association, said the new spending data and metropolitan area construction employment figures showing construction employment declined in 276 out of 337 metro areas this past year, made it clear that the industry is hurting. He said long-delayed federal legislation to invest in aging public infrastructure would provide a needed boost to the construction industry while making the U.S. more economically competitive. "Letting our roads age, our bridges deteriorate and our ports decline is no way to boost our export capacity," Sandherr said.

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