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Heavy Construction Spending Increased 1.4% in August

0 230 Market Intelligence

Heavy construction spending increased 1.4% in August to 9% above the February low point but still 4% below the stimulus boosted peak level last fall. Transportation facilities, sewage, water and conservation increased in August. The gains in transportation and water/sewer are stimulus driven and will be maintained although further gains will be smaller. The highway gain is unlikely to be sustained, says Reed Construction Data chief economist Jim Haughey.

Heavy construction spending increased 1.4% in August to 9% above the February low point but still 4% below the stimulus boosted peak level last fall. Transportation facilities, sewage, water and conservation increased in August. The gains in transportation and water/sewer are stimulus driven and will be maintained although further gains will be smaller. The highway gain is unlikely to be sustained. The level of heavy construction spending will be essentially unchanged from now to the end of 2011. President Obama’s call for borrowing for a new public works program, if enacted, is 2012 activity. This is not included in the forecast. This assumption will be revisited after the election.

Heavy construction spending is now forecast to rise about 3% over the next year, offsetting recent downward revisions. An improving economy which generates more private site work and capacity needs will offset the combination of worsening state and local government budget positions and the continued ebbing of the stimulus impact.

U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)

  Monthly Figures*
(latest actual values)
Annual Figures
  Actual Forecast
  Jul-10 Aug-10 2007 2008 2009 2010 2011
Transportation (% change is period
versus same period, previous year)
38.528 39.247 31.697 35.457 38.090 40.088 40.175
6.9% 9.1% 13.6% 11.9% 7.4% 5.2% 0.2%
Communication 18.588 18.248 27.490 26.537 19.711 18.116 18.788
  -2.5% -15.3% 23.6% -3.5% -25.7% -8.1% 3.7%
Power 86.860 84.589 65.955 80.411 88.627 82.155 79.825
  18.2% 8.2% 56.2% 21.9% 10.2% -7.3% -2.8%
Highway 79.582 83.638 76.727 80.792 81.578 80.112 85.500
  11.0% 6.8% 6.9% 5.3% 1.0% -1.8% 6.7%
Water and Sewer 43.118 44.721 40.655 42.494 40.106 41.843 45.125
  10.6% 3.4% 6.6% 4.5% -5.6% 4.3% 7.8%
Conservation & Development 6.430 6.486 5.252 5.246 5.633 6.473 6.35
  9.1% 10.3% 3.0% -0.1% 7.4% 14.9% -1.9%
Total 273.106 276.929 247.776 270.937 273.745 268.787 275.763
  10.8% 4.6% 19.5% 9.3% 1.0% -1.8% 2.6%

* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
The total includes some miscellaneous buildings.
Actuals: U.S. Census Bureau, Department of Commerce (put-in-place investment figures).
Forecasts and table: Reed Research Group.

by Jim Haughey

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