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December 2, 2009

U.S. construction industry has ‘run out of steam,’ Associated General Contractors says

Stimulus impacts limited by ‘needless delays and red tape’

Spending on non-residential construction in the U.S. tumbled 1.5 per cent in October (seasonally adjusted), the lowest annual rate since July 2007, according to new Census Bureau data.

Non-residential construction spending slumped to $652 billion, an 11 per cent decline compared to October 2008.

“Even formerly robust construction segments, such as manufacturing and power, have run out of steam,” said Ken Simonson, chief economist of the Associated General Contractors of America.

Spending on both categories of construction dropped more than 2 per cent from September, Simonson noted.

“Worse, the impacts of the stimulus have been more limited and temporary because of needless delays and red tape,” he said.

Private non-residential construction shrank 2.5 percent in October and dipped 21 per cent compared to October 2008.

Public non-residential spending slipped 0.4 per cent in October, but was up 3.7 per cent year over year.

Developer-financed categories, including private lodging, office and commercial – retail, warehouse and farm – fell between 2 and 6 per cent for the month and 37 to 45 per cent over the past 12 months.

While the largest public category, highway and street construction, was up 4.7 per cent compared to October 2008, it slipped 0.3 per cent between September and October.

“Highway and street construction clearly got a big boost from the stimulus; unfortunately many of those projects already are beginning to wind down,” Simonson said.

“Without action on new highway and transportation legislation, road and transit builders are likely to suffer further declines.”

In other public categories, educational spending climbed 1.1. per cent in October, while sewage/waste disposal and water supply projects fell 0.8 per cent and 4.9 per cent respectively.

Simonson said that some stimulus-funded construction projects, such as water and wastewater projects, have been delayed by Buy American restrictions and regulatory delays in some agencies.

“Without quicker action, construction spending will continue to shrivel, and the industry’s unemployment rate will exceed the current 18.7 rate,” he said.

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