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Sept. construction spending up; outlook mixed

Keywords: Tags  construction, steel, Kenneth Simonson, Associated General Contractors of America, AGC, Architectural Billings Index, ABI, construction employment Samuel Frizell

NEW YORK — Several key indicators suggest continued growth in residential housing construction, but relative uncertainty in nonresidential and public construction won’t help steelmakers as they await an improved building market.

Kenneth D. Simonson, chief economist of the Associated General Contractors of America (AGC), forecasts growth of 6 to 10 percent in overall construction spending next year compared with this year, but with weaker figures in public spending and nonresidential construction.

"We’re seeing continued decline in government funding. Construction has been feeling the pain of sequestrations ever since Oct. 1 of last year," he said in a webinar this month. "Federal spending has declined for 2 years in a row. ... As a result, we’re seeing a lot less federal money going into construction."

"On a year-over-year basis, public construction has continued its long decline, private nonresidential spending is mixed, and only home and apartment construction is booming," Simonson said in a statement.

Construction employment rose to more than 5.8 million in September, up 3.4 percent both month on month and year on year, according to the AGC. Employment also climbed in residential and nonresidential construction, both sequentially and vs. September 2012.

The Architectural Billings Index (ABI) showed positive trends for September as well, with its score rising to 54.3 from 53.8 in August. Any number above 50 indicating positive growth.

The strongest growth was in the West, at 60.6; and the South, at 54.1. The Midwest and Northeast were the weakest regions, at 51 and 50.7, respectively.

"The ABI has been sending a more positive signal—it’s been up in all specialties for close to a year," Simonson said. "It’s certainly a very strong sign, but it’s hard to translate a ‘yes billings were higher’ to a percentage change in construction spending."

Government funding continues to be weak as the sequester hits construction activity and slows federal construction programs.

Private nonresidential construction rose 16 percent in 2012 compared with 2011, but is likely to slow to 4 to 7 percent by the end of this year vs. last year, Simonson said. It is forecast to increase 1 to 10 percent next year, while public construction is likely to decline 1 to 5 percent.

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