2005 Construction Spending Ends on High Note, 2006 Fuel Costs to Increase

November’s construction spending outpaced September and October totals, even after the numbers for both months were upwardly revised by 1% apiece, reported Ken Simonson, Chief Economist for the Associated General Contractors of America (AGC), earlier this month. He was commenting on new Census Bureau figures that showed the value of construction put in place set a record of $1.15 trillion at a seasonally adjusted annual rate, up 0.2% from October.

“Growth has been steady and well distributed among the major construction segments for the past several months,” Simonson observed. “For the first 11 months of 2005, total construction was nine percent higher than in same months of 2004. Private residential construction grew 11 percent, public construction, eight percent, and private nonresidential, five percent.”

According to Simonson, the leading categories have been multi-retail (general merchandise, shopping centers, and shopping malls), up 25% year-to-date; manufacturing construction, up 23%; private multifamily, 21%; and hospitals, 13%.

For 2006, Simonson had these predictions: “I expect the cost of fuel, asphalt and plastics such as polyvinyl chloride (PVC) pipe, to average 10-20% higher than in 2005, because of high petroleum and natural gas costs. Copper remains expensive, and I expect continuing spot shortages of cement that will push concrete prices higher nationwide. However, steel, wood, and gypsum products should be no higher on average than in 2005 despite a lot of month-to-month volatility.”

He added that the leading construction segments are likely to be manufacturing, health care and lodging, noting that single-family construction will decrease as the year goes on.

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