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Spending on Private Nonresidential and Single Family Home Construction Continues to Languish

Total construction spending increased by 0.7 percent in October, driven largely by growing demand for power projects and public construction, the Associated General Contractors of America noted today in an analysis of new Census Bureau data. The new data, however, indicated continued weakness in many construction categories, including private nonresidential and single family construction, association officials observed.

“Without any upward trend in key private-sector construction components like homes and office buildings, it is hard to feel optimistic about the near future,” said Ken Simonson, the association’s chief economist. “With public construction at risk of cutbacks, it is premature to conclude that construction has awakened from its long nightmare.”

Simonson commented that power construction increased by 8.8 percent between September and October at a seasonally adjusted rate, although the total remained 3.9 percent below the year-ago level. Public construction, aided by federal spending on stimulus, military base realignment and Gulf Coast hurricane-control projects, edged up 0.4 percent for the month and 2.2 percent year-over-year.

Private nonresidential construction, however, slumped 0.7 percent in October, leaving the total 20.7 percent below the October 2009 figure. All 11 of the Census Bureau’s private nonresidential categories were below year-ago levels, Simonson added, with only private power and transportation showing gains from September.

Private residential investment jumped 2.5 percent for the month. However, Simonson cautioned that the apparent leap is attributable to a 3.2 percent advance in new multi-family construction and a 6.2 percent rise in improvements to existing properties, whereas single-family construction sank 1.2 percent for the month.

Association officials said that a proposal released today by the Deficit Commission to increase investments in highways, bridges and transit system construction provided some room for optimism. They urged Congress to embrace the transportation proposal, noting it would help the economy over the long run while giving a much-needed boost to short term construction demand.

“The best way to reduce the deficit and simultaneously support a strong and expanding economy is to invest in our aging network of highways, bridges and transit systems,” said Stephen E. Sandherr. “Even as the broader report calls for dramatic reductions in federal spending, it is clear that our country can’t afford to neglect its infrastructure.”

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