Construction Spending Falls to Lowest Level in 7 Years

03/08/2010 |

Construction Spending Falls to Lowest Level in 7 Years

Declining investments in private-sector non-residential construction and public construction at all levels of government drove a decrease in construction spending of 0.6 percent. According to an analysis of new federal figures by the Associated General Contractors of America (AGC), construction spending in January fell by $5.5 billion to $884 billion – the lowest level since June 2003.

“What’s clear from the data is that the downturn in non-residential construction spending is far from over,” says Ken Simonson, chief economist for AGC. “Federal funding for construction is one of the few crutches propping up a deeply wounded construction industry.”

Additionally, Simonson noted that private non-residential construction spending fell 2.1 percent between December and January, and by 20 percent over the past year. However, two major categories of federally-driven transportation spending – public highway and street construction and other transportation construction – increased by 6 and 18 percent respectively.

Direct federal construction spending increased 1.9 percent in January and 13 percent over the past 12 months to a record $31 billion. “Federal funding has been giving contractors the lifeline they need to stay in business,” says Simonson. However, the federal transportation program expired Feb. 28, putting many construction jobs at risk. “Without federal funds, total spending on highway and transportation projects is sure to plummet this year,” says Simonson.

“Even a temporary halt to the federal transportation program will have a disruptive impact on an industry coping with staggering declines in construction activity,” says Simonson. “With federal work coming to a halt and many states wondering whether to put their transportation programs on hold, construction layoffs and closures are likely to accelerate.”

Officials from the Associated General Contractors of America urged Congress to act quickly to renew the federal transportation program. Stephen E. Sandherr, CEO of AGC says, “Thousands of construction workers are counting on Congress to fix this problem before they and the entire economy are made to suffer.”

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