Article reprinted from Western Roofing magazine July/August 2007.

 

Construction Status

'Robust' Non-residential Construction 'Overpowered' Housing Slump

by Michelle Bernard, Associated General Contractors

 

 

"Robust gains in public and private non-residential construction spending overpowered the continuing slump in homebuilding in April," Ken Simonson, chief economist, the Associated General Contractors of America (AGC), said. Simonson was commenting on the June 29 construction spending and GDP reports from the Commerce Department.

                  "Total construction spending climbed 0.9% in May, seasonally adjusted, as a 2.5% uptick in non-residential spending more than offset a decline of 0.8% in residential construction," Simonson noted. "For the first five months of 2007 combined, total construction was down 3.9% compared to the same period in 2006. During that span, non-residential spending jumped 15% and residential plunged 18%.

                  "On the private side, the biggest year-to-date growth has been in lodging construction, up 60%; offices, 26%; hospitals, 22%; and multi-retail 'big box' and other general merchandise stores, shopping centers, and malls, 20%," Simonson observed. "I expect private non-residential construction to keep up the pace for the second half of 2007 and probably right through 2008 as well.

                  "Public construction rose 11% year-to-date," Simonson remarked. "The two big public categories, highways and streets, and education, accounted for just over half the public total. Highway construction was 8.2% higher year-to-date, and education was up 9.9%. Every public category was up in May and in the first five months of 2007 combined. But I foresee cutbacks later this year as state and local revenues begin to trail budgeted amounts. For instance, Virginia's governor already ordered state agencies to slow spending as real estate and sales taxes fell short of expectations.

                  "Private residential spending remains a disaster," Simonson added. "Single-family construction skidded another 1.4% in May and 27% year-to-date. Multi-family construction and residential improvements were roughly flat for the month and the first five months combined. I don't foresee an improvement in these numbers before the second quarter of 2008.

                  "Census made both routine and one-time revisions to prior data," Simonson concluded. "The estimate was boosted substantially for communications spending for wireless facilities such as cell phone towers. But the totals for 2006 and most months of 2007 were reduced, and data improvements led to an overhaul of many years of state and local spending figures." •••