Vital private construction investment needs pro-growth measures from Washington

While some Washington number-crunchers insist that there are signs of the new growth of an economic spring after a long hard winter, America’s contractors are not seeing the greening of the economy in quite the same way.

“The only green shoots contractors are seeing are the weeds sprouting around their idle construction equipment.” said Stephen E. Sandherr, the association’s chief executive officer of the Associated General Contractors of America.

He was reacting to evidence that the construction industry continues to suffer from significant declines in privately-funded construction investments. Private construction investments declined by 20.6 percent between September 2008 and September 2009 according to new Census Bureau figures. What these number reveal, says AGC, is that there’s no sign of an economic recovery yet for the nation’s construction industry.

“These figures show just how dire business conditions are for the nation’s contractors and their six million plus employees,” said Stephen E. Sandherr.

Congress must act

AGC says congress and the administration must embrace pro-growth measures to stem private spending declines to avoid greater job losses.

The federal figures show the annualized rate of private construction spending declined from $774 billion a year in September 2008 to $614 billion a year in September 2009, Sandherr noted. On the nonresidential side alone, construction spending for lodging declined by 37.4 percent, 33.3 percent for offices, and 36 percent for commercial structures over the past 12 months.

Manufacturing and power construction were the only parts of the private construction market to see increased investments, with 11 percent and 4.8 percent gains respectively, he said.

Publicly funded investments in construction did increase over the past year by 6.1 percent, from $308 billion to $326 billion, said Sandherr. Public spending on commercial facilities and power structures grew the most, with 28.8 percent and 27.2 percent increases, respectively, over the past year. However, water supply and sewage investments actually declined by 1.9 and 1.8 percent respectively.

“Increased public investments in construction and infrastructure are welcome news, but this industry will continue to suffer while demand for private construction continues to plummet,” Sandherr said. He called for a quick extension of the first-time home buyers tax credit and expansion of the carry back of net operating loss provision from two to five years for all businesses for 2008, ‘09 and ‘10 as a way to stimulate new private demand for construction.

AGC’s “blueprint”

 Announcing AGC’s “blueprint for reinvigorating the nation’s construction industry” in September, Sandherr said,“ Simply put, you can’t fix our economy until you fix the construction industry.

“These figures show just how dire business conditions are for the nation’s contractors and their six million plus employees.”

- Stephen E. Sandherr, Associated General Contractors of America

 The plan “calls for repealing the alternative minimum tax and increasing and extending a series of tax credits and cuts – including the 2001 and 2003 tax cuts – to boost investments in real estate development,” he said. We’re also calling for new incentives on global investment in real estate to make it easier for international investors to put Americans back to work.”

The AGC blueprint also calls doubling federal investments in transportation infrastructure, renovating dated and inefficient federal facilities and investing in clean water, flood control and navigation projects.