Construction Spending Hits All-Time High in February - Modern Distribution Management

Construction Spending Hits All-Time High in February

Construction spending in February 2006 was estimated at a seasonally adjusted annual rate of $1,185.4 billion, 0.8 percent above the revised January estimate of $1,176.0 billion. The February figure is 7.4 percent above the February 2005 estimate of $1,103.6 billion.


February spending was a record.


During the first two months of the year, construction spending amounted to $161.5 billion, 8.5 percent above the $149 billion for the same period in 2005.


For the first time since 2001, private nonresidential construction led spending in the first two months of the year with a 9.6 percent increase from last year. Private residential construction was 7.1 percent higher, and public construction increased 6 percent.


On a two-month basis, shopping center construction jumped 61 percent, hospital construction grew 22 percent, and manufacturing and commercial warehouse construction climbed 20 percent. The office segment was up 18 percent. Single and multifamily construction both grew 14 percent in the first two months of the year compared to the same period last year.


Ken Simonson, chief economist for The Associated General Contractors of America, said builders have a backlog of unbuilt houses and condos, contributing to the continued growth of construction spending despite slowed home sales. “Residential construction spending should hold up for a few more months,” he said.


On the public side, several sectors saw double-digit increases: educational, sewage and waste disposal, amusement and recreation, public safety, and water supply construction. Public construction should stay high through the year.


Materials Costs Go Higher
According to the AGC’s latest construction inflation report, many construction materials are going up in price faster than are consumer items or most producer costs. The Producer Price Index for construction went up 0.3 percent in February.


AGC predicts continued cement shortages at least for awhile, despite the recent signing of an agreement with Mexico to lessen tariffs. The fall may see shortages of liquid asphalt, as well.


Oil and natural gas prices have fallen sharply, but production in the Gulf of Mexico is still down by more than 15 percent, keeping supplies tight. Diesel prices for 2006 as a whole should be up 10-30 percent over 2005.


Product that rely on natural gas or that have high transport costs, such as paints and coatings, insulation, and brick, are likely to rise 5-10 percent in price. Construction plastics prices should come down from recent highs, but average 10-20 percent higher than year-ago levels.


February 2006 Synopsis
Spending on private construction was at a seasonally adjusted annual rate of $931.0 billion, 1.2 percent above the revised January 2006 estimate of $920.3 billion. Other private construction:



  • Residential construction $665.7 billion, 1.3 percent above January
  • Nonresidential construction $265.3 billion, 0.8 percent above January

Spending on public construction was $254.4 billion, 0.5 percent below the revised January 2006 estimate of $255.7 billion. Other public construction:



  • Educational construction $67.7 billion, statistically unchanged from January
  • Highway construction $69.3 billion, 0.7 percent above January

Resources
For more on construction spending in February 2006, broken down by sectors, click here.

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