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SPIKE IN PUBLIC OUTLAYS SENDS CONSTRUCTION SPENDING TO FOUR-YEAR PEAK

WASHINGTON, D.C. — An unusual surge in public construction in October pushed total construction spending to its highest level since May 2009 despite a dip in both private residential and non-residential activity, according to an analysis of new U.S. Census Bureau data by the Associated General Contractors of America.

Meanwhile, association officials are urging lawmakers in Washington to make water and surface transportation investment a top federal priority.

“Nearly every category of public construction increased in October, according to the preliminary census figures, although for the first 10 months of 2013 combined, public spending continues to lag the 2012 year-to-date total,” says Ken Simonson, the association’s chief economist. “Meanwhile, residential spending slipped for the month but still showed strong year-to-date gains, and non-residential spending remained stuck in neutral.”

Construction reported in October totaled $908 billion, 0.8 percent higher than in September. But figures for August and July were revised down from the originally published levels, which exceeded the current October estimate. The total for the first 10 months of 2013 was 5 percent above the year-to-date mark for the same months in 2012.

Driving Factors

Public construction spending jumped 3.9 percent in October but trailed the 2012 year-to-date total by 2.8 percent. The two largest public components were mixed: highway and street construction increased 0.6 percent in October and 0.3 percent year-to-date, while educational construction leaped 8.5 percent for the month but fell 8.5 percent year-to-date, says Simonson.

Private residential spending slid 0.6 percent for the month, but still climbed 17 percent year-to-date. New single-family construction decreased 0.6 percent in October, but has soared 30 percent in the first 10 months of 2013 compared with 2012. New multifamily spending advanced 2.2 percent in October and 46 percent year-to-date.

Private non-residential spending edged down 0.5 percent for the month and up 0.8 percent year-to-date, according to Simonson. The largest private non-residential category, power — including oil and gas as well as electricity — plunged 5.7 percent and 5.8 percent over the two time periods. But the next three niches in size — manufacturing, commercial (retail, warehouse and farm) and office — rose for the month and year-to-date.

What’s Ahead?

“Construction will likely display varied patterns in the next several months,” says Simonson. “Multifamily construction will keep burgeoning, but single-family homebuilding may stall. Private non-residential spending should benefit from more power, energy and manufacturing work. Public construction remains threatened.”

Association officials say Congress and the administration should keep public construction from returning to its recent slump by quickly completing legislation for water resources development that has already passed both houses. Congress should also pass a new surface transportation bill next year that funds repairs to deteriorating highway, bridge and transit infrastructure, say the contractors.

Finally, they added that any new transportation bill must include provisions to adequately fund the nearly depleted federal Highway Trust Fund.

“If Congress can act in a bipartisan way on transportation funding as it did on the water resources bill, it can avoid a cliff-like drop in highway spending,” says Stephen Sandherr, the association’s chief executive officer.

— Staff reports

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