SIMONSON: Economists Paint Slightly Brighter Picture for Overall Economy and Construction

reprinted from the AGC Website.

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Simonson called this a time of change in construction “for better and for worse.” On the positive side, he said activity has begun to improve for warehouse, hospital and apartment construction, with a pickup likely later in 2011 for manufacturing and hotel modernization, expansion and some new projects. But many government contractors have benefited from federal spending on stimulus, military base realignment and Gulf Coast hurricane restoration projects that are slated to end later this year. With the House of Representatives pressing for spending cuts and continuing downturns in state and local budgets, the outlook is quite negative for public construction.

The AGC chief economist also pointed out that construction materials costs have been rising much faster than either consumer prices or finished building prices. That means that owners who hear about inflation in terms of consumer prices are not aware of the cost pressure on contractors, while flat bid prices show that contractors are not willing or able to pass through higher expenses—a vise that could squeeze some firms out of business. Nevertheless, Simonson said he expects the industry to end 2011 with a 3-7 percent increase in construction spending compared with 2010, a 3-8 percent range of materials price increases, and labor cost increases of less than 2.5 percent.


Steel Supply Note: Ken Simonson is the Cheif Economist at AGC,(The Associated General Contractors of America). He also serves as the Vice President of NABE (National Asociation of Business Economics).