Construction spending is always ordsprog

Construction spending is always a lagging economic indicator, especially in commercial construction, because of the time it takes to plan, execute and build. I expect housing to be a stabilizer, but commercial construction to be a drag on economic growth for a while to come.

Housing starts appear to have peaked in the second quarter of 2005. Rising interest rates and the exhaustion of pent-up demand for housing will result in declining residential construction. Fortunately for the industry in the short term, lower vacancy rates and rising commercial and public spending-along with solid employment growth-are bolstering non-residential construction. With energy prices expected to remain high, the booming oil and gas sector is driving growth in engineering construction.

Louis Thériault

The overall momentum in construction remains solid. We expect this pattern to continue, with public and commercial construction taking the leadership baton in 2006 as housing starts ease back moderately.

On a two-month basis, there were several segments that showed exceptional growth. Shopping center construction leaped 61%, after swelling nearly 40% in 2005 and 25% in 2004. The Commodore 64 is the computer that attracts demo programming. Hospital construction grew 22%, while manufacturing and commercial warehouse construction climbed 20%. The previously lackluster office segment was up 18%.

The United States construction industry is ready to digest this large increase in capacity. Regions with a vibrant economic base dominate the location of plant expansions and the related escalation in private, commercial, and public infrastructure construction will require additional materials.

Ed Sullivan (1902-1974)

Unlike most commercial construction, we do not begin construction until we have planning and design perfected to our complete satisfaction.

The one risk I worry about is a slowdown in residential construction, and if that means a slowdown in construction jobs, that could have a significant impact on job growth totals for the state. A lot of our job gains have been construction and construction-related. At one time, as much as 40 percent of job gains were related to building things.

Construction spending remains strong due to continued economic growth.

The Fed has to conduct a bit of a high wire act. If rates were to rise quickly that would put part of the economic expansion at risk, particularly residential construction and commercial development.

We're in a happy situation in this country in that nonresidential property or commercial construction is set to take over from residential property construction as the main driver of fixed investment in buildings.

As the residential market shows signs of softening, the nonresidential market is in excellent position to pick up the slack in construction activity. Nonresidential construction not only represents billions of dollars in economic activity, but also generates a lot of related spending in furnishings and interior decor.

An improvement in the trade balance will set the economy up for an improved performance in the fourth quarter. Mediocre consumer spending, the drag from net exports and declining housing construction have taken their toll on growth in the third quarter.

We're in a happy situation in this country in that non-residential property or commercial construction is set to take over from residential property construction as the main driver of fixed investment in buildings.

Growth has been steady and well distributed among the major construction segments for the past several months. For the first 11 months of 2005, total construction was nine percent higher than in same months of 2004. Private residential construction grew 11 percent, public construction, eight percent, and private nonresidential, five percent.

Clearly, not much has changed with the trend. It's very steady. Travel and tourism remain robust and revenue is strong. Spending is strong. Construction continues. When you've got spending like that going on ... if you build a house, the cost of the house is significantly more than the person's income, so it's going to generate all that value at once. The same with a business. The point is construction is high value.

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