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Stimulus Funding Increases Construction Spending in March

May 12, 2010 11:23 AM

Increases in public-sector construction spending, driven by stimulus funds, helped boost total construction activity by almost $2 billion between February and March, according to an analysis of federal spending figures by Arlington, Va.-based Associated General Contractors of America. The figures show that the stimulus has gone from slowing declines in construction spending to contributing to increases, the association notes.

"If it weren’t for public investments in infrastructure and construction, this industry would be in free fall," says Ken Simonson, the association's chief economist. "Fortunately, the stimulus is now helping rebuild a construction industry devastated by relentless declines in private-sector activity."

Simonson notes that the new Census Bureau figures show construction spending at an annualized rate of $847.3 billion, an increase of 0.2% from $845.5 in February. While private-sector construction spending still dominates the market, it declined 0.9% between February and March, from $555.7 to $550.8 billion. The largest declines came in communications (12.1%), lodging (4.6%) and power (3.8%) construction.

Public-sector construction, meanwhile, increased 2.3% from $289.9 to $296.5 billion during the same timeframe. The largest increases came in publicly-funded power (23.7%), transportation (12.4%) and water supply (5.9%) construction. Simonson notes that these areas and others showing increases received significant funding from last year's stimulus law.

Association officials caution that the increases in construction spending were unlikely to last once the stimulus runs its course. They note that high office and retail vacancy rates, as well as underutilized manufacturing capacity, indicate private-sector construction will continue to decline through at least the end of the year. They add that cash-strapped state and local governments won't be able to broadly increase capital programs until at least 2012.

"With no transportation bill, no aviation legislation, and no water trust fund, the only thing waiting for this industry after the stimulus is a funding cliff," says Stephen Sandherr, the association's chief executive officer. "If things don’t change soon, all the stimulus will have been was a really expensive way to delay hardships and layoffs for thousands of construction workers."

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