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ROBUST' NONRESIDENTIAL CONSTRUCTION 'OVERPOWERED' HOUSING SLUMP, AGC SAYS

June 29, 2007

Washington, D.C.—“Robust gains in public and private nonresidential construction spending overpowered the continuing slump in homebuilding in April,” Ken Simonson, Chief Economist for The Associated General Contractors of America (AGC), said today. Simonson was commenting on the June 29 construction spending and GDP reports from the Commerce Department.

“Total construction spending climbed 0.9 percent in May, seasonally adjusted, as a 2.5 percent uptick in nonresidential spending more than offset a decline of 0.8 percent in residential construction,” Simonson noted. “For the first five months of 2007 combined, total construction was down 3.9 percent compared to the same period in 2006. During that span, nonresidential spending jumped 15 percent and residential plunged 18 percent.

“On the private side, the biggest year-to-date growth has been in lodging construction, up 60 percent; offices, 26 percent; hospitals, 22 percent; and multi-retail—‘big box’ and other general merchandise stores, shopping centers and malls—20 percent,” Simonson observed. “I expect private nonresidential construction to keep up the pace for the second half of 2007 and probably right through 2008 as well.

“Public construction rose 11 percent year-to-date,” Simonson remarked. “The two big public categories—highways and streets, and education—accounted for just over half the public total. Highway construction was 8.2 percent higher year-to-date, and education was up 9.9 percent. Every public category was up in May and in the first five months of 2007 combined. But I foresee cutbacks later this year as state and local revenues begin to trail budgeted amounts. For instance, Virginia’s governor already ordered state agencies to slow spending as real estate and sales taxes fell short of expectations.

“Private residential spending remains a disaster,” Simonson added. “Single-family construction skidded another 1.4 percent in May and 27 percent year-to-date. Multi-family construction and residential improvements were roughly flat for the month and the first five months combined. I don’t foresee an improvement in these numbers before the second quarter of 2008.

“Census made both routine and one-time revisions to prior data as part of today’s release,” Simonson concluded. “The estimate was boosted substantially for communications spending for wireless facilities such as cellphone towers. But the totals for 2006 and most months of 2007 were reduced, and data improvements led to an overhaul of many years of state and local spending figures.”

The Associated General Contractors of America (AGC) is the largest and oldest national construction trade association in the United States. AGC represents more than 32,000 firms, including 7,000 of America’s leading general contractors, and over 11,000 specialty-contracting firms. More than 13,000 service providers and suppliers are associated with AGC through a nationwide network of chapters. Visit the AGC Web site at www.agc.org. AGC members are "Building Your Quality of Life.”

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