Sunday, July 25, 2010

Recent "Construction Spending Report" on Associated Builders & Contractors web-site

There was a very interesting article posted on July 1, 2010 on ABC's (Associated Builders and Contractors) web-site. That article talks about "construction spending".

You can access the full article at this Internet address:

For me, the most interesting part of the article was the "analysis" part. That analysis was provided by Anirban Basu, ABC's "Chief Economist."

Below, you'll find Mr. Basu's analysis. (I've taken the liberty of "bolding" some of his comments, simply so they will stand out.)


“One could view today's release as positive news,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The level of construction spending in May hardly changed from the prior month, and April represented an improvement over March. However, for the most part, today's report should be viewed as further indication that the U.S. economic recovery continues to stall.

“Construction spending growth, to the extent that it exists, continues to be the domain of publicly-financed projects, particularly those attached to the stimulus package passed in February 2009,” said Basu. “This is clearly apparent in the list of subsectors that continue to register year-over-year growth, such as conservation and development, transportation and highway/street.

“If the increase in construction spending was motivated by privately-financed activities, there would be a basis upon which to rejoice since that would be an indication that the private portion of the construction economy is gaining traction,” Basu said. “Privately-motivated growth can be sustained indefinitely, at least theoretically. On the other hand, publicly financed growth associated with deficit spending cannot last into perpetuity, not even theoretically.

“Unfortunately, steep year-over-year declines continue to be apparent in privately-financed, developer-driven activities, most notably in construction spending related to lodging, which has declined 62.1 percent over the past twelve months,” said Basu.

“The bottom line is that the impact of the stimulus will eventually run out. When that happens, privately financed activities will need to be expanding merely to hold construction spending level in the U.S. In the absence of private momentum, the near-term remains largely positive for segments directly impacted by stimulus dollars and largely negative for those that are not,” Basu said.

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