Nonresidential Construction Spending Keeps 'Torrid Pace'

Ken Simonson, chief economist for the Associated General Contractors, said he was looking on the bright side when commenting on a Jan. 3 report from the U.S. Census Bureau. The report showed the value of construction put in place in November 2006 totaled $1.184 trillion at a seasonally adjusted annual rate, down 0.2% % from the upwardly revised October total. "At the risk of sounding like a 'two-handed

Ken Simonson, chief economist for the Associated General Contractors, said he was looking on the bright side when commenting on a Jan. 3 report from the U.S. Census Bureau. The report showed the value of construction put in place in November 2006 totaled $1.184 trillion at a seasonally adjusted annual rate, down 0.2% % from the upwardly revised October total.

"At the risk of sounding like a 'two-handed Pollyanna,' I must point out there was lots of good news hidden in today's seemingly gloomy construction spending report," Simonson said. "Nonresidential spending showed a strong 1.2% gain in November, even after the October figure was revised from a small loss to a 1.1% gain.

"Meanwhile, residential construction spending shrank again in October by 1.6%, bringing the cumulative decline to 11% since peaking last March."

Simonson said he has observed "no letup in the torrid pace of private nonresidential spending growth."

"For instance, lodging construction - mainly hotels and resorts - jumped 4% in November and was up 71% from the November 2005 level," he said. "Electric power construction charged ahead 4% in November and was 18% higher than a year ago. Manufacturing construction had a 1% gain for the month and was 11% ahead of the year-ago level. Health-care construction, mainly hospitals, gained 0.4% for the month and 20% compared to November 2005.

"The diverse commercial sector, with strong gains in multi-retail and warehouse components, tacked on 1% in November and 11% compared to the year-ago month."

Education spending climbed 2% for the month and 6.6% from a year earlier, Simonson said.

"A closer look at the private residential totals shows new multifamily construction gained 1% in November and 16% compared to November 2005, while improvements rose 0.6% and 6.7%," Simonson said. "But those numbers were swamped by declines of 3.1% and 20% for new single-family construction.

"I expect to keep using both hands in 2007. Energy- and power-related construction, hotels, hospitals and rental housing will all perform well, while single-family and condo construction will sink the totals."

AGC represents more than 32,000 firms, including 7,000 general contractors and more than 11,000 specialty-contracting firms.