Govt Stimulus Spending Leads to Boost in Construction

By: Timothy McFarlin | Published: May 11th, 2010 | Category: Budget & Debts

Though the amount of money spent on construction jumped for the first time, two months ago, projects in the private sector dropped to numbers not seen since 1999. Housing as well as commercial real estate construction has hit a low not seen in decades. According to the Commerce Department, there was a 0.2% increase in construction activity—with most of the projects being public buildings. In fact, public buildings, paid for by the feds, increased 2.3% (the largest increase within a little over a year).

Just this past March, total building activity produced a seasonally adjusted annual rate of $847.3 billion, while residential activity dropped 1.1% to an annual rate of $251.8 billion on the heels of a 3.4% drop back in February. Meanwhile, non-residential activities sank 0.7%, making it now, 12 straight months of declines and an adjusted annual rate of $299 billion. Analysts from IHS Global Insight, have projected a boost in non-residential construction to occur in 2012.

After all was said and done, private construction’s annual rate of $550.8 billion, is its lowest since 1999, when it was $548.9 billion. There’s no denying the $787 billion (which Congress approved early last year) economic stimulus program, has contributed greatly to the unexpected jump in construction spending. But what will happen when this program’s money runs out? And when would it run out?

These days, based on these numbers, the main concern is home/residential construction will keep falling behind a buyer’s tax credit, as well as the rising numbers of foreclosures, as more and more homes are continuously put back on the market.

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