Steep plunge in construction spending will continue through April

04/03/2009 by Jim Haughey

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The construction spending reports through April are “pre-stimulus”.  This means no significant impact from the $787B stimulus funds nor from the related programs to subsidize home purchases and mortgage payments and to reduce borrowing costs and provide more lendable funds. The first significant stimulus impact will be as early as May.  This will be very small but will get progressively larger over the next year as more stimulus funded projects begin construction.

Reed Construction Data does not expect monthly gains in construction spending to resume until yearend. Late in the year this will result from the cumulative impact of the stimulus spending, significant price cuts throughout the economy and the turn of the manufacturing and distribution inventory cycle from reduction to accumulation.

Resumed expansion in construction spending will occur first in consumer driven sectors, such as housing and retail and last in capital goods driven sectors such as power and manufacturing.

 

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