Construction spending increased by 0.2% between August and September but was down 1.3% compared to September 2010, the Associated General Contractors of America (AGC) reported recently in an analysis of new Census Bureau data. Association officials noted that growing declines in public sector activity continue to offset modest increases in private sector demand for construction.

“In less than a year’s time, the public sector has gone from propping up the construction industry to holding,” said the association’s Chief Economist Ken Simonson. “Even as local and state budgets continue to contract, the federal government is winding the stimulus and base realignment programs down and cutting billions from key water and facility investment programs."

Simonson noted that the total, seasonally adjusted annual construction spending rate in September 2011 was $787.2 billion, compared to $786.0 billion in August, and $797.3 billion in September 2010. Private sector construction spending increased by 0.6% between August and September from $499.0 billion to $501.8 billion, and is up 3.9% compared to last year. Meanwhile, public construction spending went from $287.0 billion in August to $285.3 billion in September, a 0.6% decrease, and is down by 9.2% compared to last year.

Spending on health care construction experienced the largest private sector increase during the past month (3.5%), while spending on office construction declined by more than any other sector of private construction (0.8%). In contrast, publicly funded power construction activity grew by 2.5% during the past month while investments in conservation (down 8.3%), transportation (down 4.7%), and public safety (down 4.5%) experienced large declines.

Association leaders said that instead of cutting infrastructure investments, federal officials should work to shore up, or create new, trust funds that finance federal construction programs. They noted that Congress is over a year late in passing long-term surface transportation legislation and two years late in passing legislation dealing with aviation construction. And they said Congress could improve water systems by establishing a Clean Water Trust Fund.

“We don’t have to choose between balancing the budget and allowing infrastructure to fall into disrepair,” said Stephen E. Sandherr, the association’s CEO. “The good news is there is a fiscally responsible way to repair infrastructure and rebuild our economy.”