Construction Spending in June a Mix

The Census Bureau's report on construction spending in June showed how uneven the industry's condition is. Total spending edged up 0.1 percent to a seasonally adjusted annual rate of $836 billion. (Seasonal adjustment takes into account variation due to normal weather or holidays. Annual rate allows ready comparison to full-year totals.) Despite the tiny gain for the month, the June total was 7.9 percent smaller than in June 2009. The three major components showed divergent patterns. Public construction, buoyed by stimulus-supported categories such as highways and other transportation facilities, wastewater and public housing, climbed 1.5 percent for the month, though spending was still 4.1 percent lower than a year ago. The biggest drag on public construction is prekindergarten-12^th grade construction, which did not receive stimulus funding and plunged 3.4 percent for the month and 27 percent year-over-year. Private nonresidential construction slipped 0.5 percent for the month and 24 percent compared with June 2009. All categories dropped-many of them sharply-from a year ago. But there was an upturn last month in private hospital construction (2.3 percent) and private power construction (3.1 percent), both of which should perform well in the next several quarters. Private residential construction fell 0.4 percent for the month but is up 12 percent from the extremely low level a year ago. New multi-family spending inched up 0.3 percent, having plunged 52 percent over the past year. In contrast, new single-family construction dipped 0.7 percent for the month but was up 26 percent from a year before. Going forward, stimulus will continue to help for a while. Even the highway funds, which constitute the largest stimulus category and the first to be turned into contracts, have only been 42 percent paid out to contractors. Base realignment projects continue to keep some contractors busy. But both types of work will wind down in 2011, and it is essential that Congress and the White House reach agreement on long-term infrastructure spending bills to avoid another crippling slump in public work. Most private nonresidential categories seem headed down for several more months, although the rate of decline should taper off. Multi-family may be the first building category to turn positive. At the opposite extreme, public school construction is showing no signs of leveling off, as property tax receipts shrink from lower assessments and higher delinquency rates. Read AGC's press release here. The news was covered in the San Diego Business Journal and ForConstructionPros.com, among others. Listen to Ken Simonson discuss California's construction market on KQED Radio here.