US Home Construction Soars to Four Year Highs

The recovery in the United States construction industry continues as the latest Commerce Department figures show housing construction activity surging to its highest level in four years.

In the month of February, the annualized, seasonally adjusted value of work put in place throughout the residential construction sector came in at $303.4 billion, the highest level on record since November 2008.

Overall, the total value of work done on all types of construction last month increased by 1.2 per cent and was 7.9 per cent higher than in February 2011.

Associated General Contractors of America chief economist Ken Simonson welcomed the figures but cautioned that a 0.9 per cent rise in public spending is likely to be short-lived. He has called on policymakers to invest further in infrastructure.

“It is encouraging to see growth in both monthly and year-over-year totals in private residential and non-residential construction spending,” Simonson said. “There are increasing signs that 2013 will be a good year for a wide variety of project types.”

“There is little doubt that construction of new houses and apartments will continue to boom in the next several months, based on data covering recent housing starts and building permits, as well as reports of rising rents, occupancy rates and new-home sales in many markets. On the non-residential side, there should be a lot of activity involving pipelines, manufacturing, railroads and trucking, and warehouses.”

Referring specifically to the non-residential sector, where spending levels have shown marked improvement in recent months, Associated Builders and Contractors chief economist Anirban Basu was equally optimistic.

“The U.S. economy continues to outperform expectations and this is gradually translating into improved performance in non-residential construction,” Basu said. “While the non-residential construction industry’s recovery cannot be characterized as brisk, there continues to be forward momentum in a number of key private segments, including lodging and power. If the nation is able to continue to add jobs as it has in recent months, office and commercial segments should also experience improved performance.”

While Basu welcomes an uptick in public non-residential construction – a sector which has been slumping recently and is expected to be badly hit by sequestration measures – he warned that the full impact of sequestration is yet to be felt and that both positive wealth effects on consumer spending and momentum in the broader economy at large could dissipate should the recent rally in financial markets reverse course, affecting spending throughout the industry.

By Andrew Heaton

All Images Credit: AP Photo/Tony Dejak