Commerce report shows slowed construction for September

Spending on construction put in place in September was lower than most Wall Street forecasters had predicted. According to a report recently released by the Commerce Department, September housing starts fell 6 percent, and residential construction fell 0.2 percent — the category’s first decline since early 2003.

According to the report, the annually adjusted value of construction put in place in September was $1.014 trillion, which is $136 million lower than the August rate. Reuters economic analysts had expected construction spending would increase 0.5 percent in September. Some economists say the decrease may be the result of the highly active hurricane season.

Ken Simonson, chief economist for the Associated General Contractors of America, says that while month-to-month figures may seem volatile, the year-to-date figures give a more accurate view of the economy. According to Simonson, the yearly percentages show gains in almost all public and private nonresidential categories and in residential construction.

During the first nine months of 2004, private residential construction was up 15 percent compared to the same period in 2003, while public and private nonresidential construction were both up 4 percent. In the nonresidential construction category, lodging, amusement and recreation, health care and office construction reported the most gains. In public projects, highway and street construction was up 6 percent and education up 3 percent.

“The rapid rise in costs — for steel, petroleum products such as diesel fuel, asphalt and oil-based roofing, plumbing and insulation materials — means many contractors are not making money in spite of a rise in activity,” Simonson said. “Nevertheless, the outlook remains moderately positive for a further expansion in many nonresidential private and public categories.”

Simonson expects non-residential construction to remain strong through 2005, but says residential construction starts will probably decrease over the next year.