Nonresidential Building Sets 13th Consecutive Record Despite Housing Slide

By Consulting Specifying Engineer Staff November 9, 2006

Nonresidential construction spending climbed to its 13th consecutive record in September, showing that the homebuilding slide hasn’t carried other segments downhill with it. This, according to Ken Simonson, chief economist for the Associated General Contractors of America (AGC), while commenting on the Nov. 1 construction spending report from the U.S. Census Bureau.

“[The] Census said that seasonally adjusted construction spending slipped 0.3% in September, the third straight monthly drop,” he said. “But nonresidential construction rose 1.1%, the 15th monthly rise in a row and the 13th record. Unfortunately, that wasn’t enough to offset a 1.1% monthly drop in residential construction, which has now fallen 8.2% since peaking last March.”

According to Simonson, in the first nine months of 2006, overall construction spending was up 6.6% from the same period during 2005, and private nonresidential construction jumped 17% and public construction rose 1%.

Major private-sector growth categories on a year-to-date basis included lodging, up 48% compared to January-September 2005; multi-retail, up 37%; hospitals, up 25%; and manufacturing, up 23%.

“Nearly all of these categories should continue growing over the next year,” Simonson concluded. “I believe the economy is still fundamentally strong, and the housing slide will have limited impacts on other segments. A bigger concern is that fast-rising materials costs have forced cancellation or delay in many projects. Cost increases should moderate in the next few months, but materials costs will still outrun overall inflation.”