The month of October marked a 37-month construction spending high, accumulating a seasonally adjusted annual rate of $872 billion, according to the latest Associated General Contractors of America (AGC) report. October's adjusted annual rate was up 1.4 percent from September and 9.6 percent from October 2011. On average construction costs increased 0.8 percent in 30 cities from July 1 to October 1 and 1.8 percent during 12 months. Despite Hurricane Sandy's destruction, October was the seventh consecutive monthly gain. The United States Census Bureau noted the storm had little affect on the month's estimates because the storm targeted a small location at the end of October.
"The Census Bureau posted a sheet of frequently asked questions that stated the agency did not believe Sandy measurably affected either actual results or reporting," says Ken Simonson chief economist of AGC. "I don't have firsthand knowledge of what reports they received but the impact was limited to the last three days of the month (at most) in a fairly small (albeit dense) geographic area, so I agree that the impact on the data for October should be minimal. For November, there will be a number of suspended projects and starts that are deferred or canceled but also additional spending on restoration, renovation and replacement, so it is hard to predict whether there will be a measurable positive or negative impact. Most major reconstruction will take months or years to show up, as it will depend on funding, plans and permits."
October's private nonresidential categories rose 1.6 percent for the month and 19 percent over 12 months. Manufacturing construction fell 2.5 percent in October, but grew 3.6 percent year-over-year. Commercial construction rose 1.2 percent and 9.5 percent, respectively. Meanwhile, highway and street construction spending fell 2.4 percent and 5.0 percent, while educational construction rose 0.9 percent for the month but fell 2.8 percent over 12 months. Experts predict October's positive growth has the potential to carry over into the upcoming months.
"…I think the underlying trends that have prevailed for several months-accelerating improvement in three sectors residential construction, roughly 10 percent year-over-year growth in private nonresidential construction, and gradual reduction in public construction spending-will remain in place well into 2013," says Simonson. "Given that the three sectors are nearly equal in size at the moment, this combination should mean total construction spending will increase at a moderate (5 to 10 percent) year-over-year rate, even if the month-to-month figures vary considerably."
