Construction spending declined $11.6 billion, or 1.3 percent, in February, to $846 billion, the lowest figure since 2002, according to the Associated General Contractors of America. Declines occurred relative to both the previous month and February 2009 in most categories of private residential and nonresidential construction, as well as public construction, said AGC chief economist Ken Simonson.
“Most of the economy seems to be improving, but construction is falling into an even deeper hole,” said Simonson. “Bad weather may account for a small part of February’s downturn, but most of the contraction reflects ongoing lack of demand, tight credit conditions and shrinking state and local budgets.”
Simonson said new single-family construction spending remained essentially flat in February, dipping by 0.1 percent after eight consecutive monthly increases, although the number was 3.9-percent higher than February 2009. Improvements to existing single- and multi-family construction declined 4.3 percent for the month, but were 4.3-percent higher than February of last year.
“These numbers suggest that single-family construction will rebound in 2010, even as multi-family continues to sink.” New multi-family construction spending was flat in February but 52-percent below the year-ago number.
“Among private non-residential categories, the only bright light is power construction — power plants, renewable such as wind and solar, and transmission lines — where spending rose 1.3 percent in February and 9 percent compared to a year before,” Simonson said. “I expect this good news to continue, but I also anticipate further double-digit annual declines in other categories.”
Simonson noted spending on lodging dropped 6.7 percent for the month and 53 percent year over year; commercial, including retail, warehouse and farm, dropped 3.5 percent for the month and 38 percent year over year; private offices plunged 2 percent for the month and 38 percent year over year, while manufacturing rose 3.4 percent for the month but dropped 35 percent year over year.
Health care spending dropped 1.6 percent in February and 15 percent year over year, but Simonson noted it was too early to tell what direction the sector will go in for the remainder of the year. “It will take a while for providers and investors to digest the implications of the new law,” he said.