Construction recession at end?

According to Jim Haughey, an economist for Reed Construction Data, we may have reached the final phase of the construction recession. His observation is based on trends in developer-financed construction.

Total construction spending dropped 1.2 percent in December, but the level of spending in November was revised up. The upward revision for private construction spending more than offset the downward revision for public construction spending. This reverses the pattern in the last few months when private developer financed spending was revised down on late information about suspensions of previously started projects.

According to Haughey, if this reversal in trend holds, it signals the beginning of the final phase of the construction recession: The plunge in developer financed construction ends and the full impact of the recession finally reaches public construction. Note that office and retail construction spending increased slightly in December, while spending for highway and water/sewer projects fell significantly. Total private construction spending declined in December, but the drop was almost entirely in the unreliable measure of residential remodeling spending.

The Reed Construction Data forecast has been revised slightly down to now project a 12.2 percent drop in 2009, a 4.6 percent drop next year and a 6.2 percent recovery in 2011. Monthly jobsite construction spending is expected to continue falling into the winter before a turnaround in May or June. The cumulative decline since spring 2007 has now passed 22 percent with a further 1-2 percent fall expected. -- Posted by Mark S. Kuhar