November 3, 2003
“Construction put in place showed amazing strength in September,” said Kenneth D. Simonson, chief economist for the Associated General Contractors of America (AGC), the nation's leading construction trade association. “For a change, private nonresidential construction led the growth parade, while housing and public construction set monthly records.”
Simonson commented on the Census Bureau's release today of data on the value of construction put in place, which showed that the total amount spent on construction projects in September rose for the fourth month in a row, to a third straight record of $910 billion at a seasonally adjusted annual rate. That was 1.3% above the upwardly revised August total of $899 billion (initially estimated at $883 billion). The total for July was also revised upward, to $893 billion (from $881 billion). Seasonally adjusted spending in September was 6.5% higher than a year before; for the first nine months of 2003, spending totaled 3.1% more than in January-September 2002.
“Private nonresidential construction climbed 2.5% from August to September on a seasonally adjusted basis, reaching its highest level since April,” Simonson said. “A particularly encouraging element of this segment was manufacturing construction, which hit a 13-month high.
“Today's report from the Institute for Supply Management that new orders and production in manufacturing both grew for the sixth consecutive month offers hope that factory construction will continue to grow despite low capacity utilization estimates from the Federal Reserve.
“The 'healthiest' major nonresidential construction category remains health-care construction, which was up 3.7% for the month and 10% year-to-date,” Simonson noted.
“Private residential spending achieved a third consecutive record in September, rising 1.4% form August. Both August and July were revised up,” Simonson observed. “With mortgage rates now drifting down again after the brief upturn in the summer, I think housing construction will stay strong. Even multi-family construction, which I expected would slump, is up 3% through the first nine months of 2003 compared to the same period of 2002, while single-family construction has posted a 13% gain.
“Public construction set a record for the fourth straight month and rose for the sixth time in a row,” Simonson noted. “Although the September total was almost indistinguishable from August's upwardly revised figure, it is heartening that budget cuts haven't slowed public construction yet. The year-to-date total is 2.5% ahead of the total for the first nine months of 2002.
“One of the two largest public categories, highway and street spending, rose 0.9% for the month to its highest seasonally adjusted level since January,” Simonson commented. “AGC looks forward to the imminent introduction of a six-year highway reauthorization bill that will enable highway spending to keep growing.
“The other major public category, educational construction, was flat in September but has risen 2% so far this year,” Simonson added. “I still expect university-level construction to fade as trustees cut budgets, but through September, this subcategory is up 9.5% from January-September 2002, while primary and secondary school construction is off by 2.6%.”
Simonson concluded, “I think the strong September figures and upward revisions for July and August mean gross domestic product for the third quarter may have grown even more steeply than the 7.2% rate reported last week. Although I expect GDP and construction to slow in the fourth quarter, the great third-quarter figures give me hope that both public and private nonresidential construction will do better in 2004 than I had been predicting.”
Note: The new Census data are at www.census.gov/const/www/c30index.html.