Despite the economic silver lining of increased construction spending in the wake of natural disasters, the increases following Tropical Storm Sandy may not fully offset industry slowdowns and cancelled building plans, according to Ken Simonson, chief economist for the Associated General Contractors of America. Simonson is president of the National Association of Business Economics, and spoke recently during a webcast panel of economists NABE assembled to discuss the economic implications of the storm.
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“I hate to pour more rain on this parade, but I don’t see (post-Sandy construction activity) as being much of a net positive,” Simonson says. One reason for this is the initial slowdown caused by the storm. While the immediate area will experience some pick-up, he says, regional economic activity slowed significantly during and following the storm, and construction activity was not immune.
Even after builders are able to resume work, rebuilding-related construction upturns will be deferred and gradual, since rebuilding funds will take time to filter through. For example, Simonson says the Federal Highway Administration immediately offered $10 million to New York and $3 million to Rhode Island to assist with repairs, but “that’s just a drop in the ocean” toward the repairs that will be needed, and it will take time for dollars to translate into projects.
Residential rebuilding funds from insurance dollars will also take time to turn into new construction, especially where sites need to be cleared and materials need to be procured.
Another reason hopes for a construction surge may go unfulfilled is that some businesses destroyed by the storm may not re-open. Others that had been ready to expand and occupy new space, Simonson says, may postpone or cancel those plans.
Similarly, destroyed homes won’t necessarily be replaced. Aside from the immediate use of crews to do clean up and emergency repairs, he says construction’s impact within the region “will be small and, measured over a long period of time, negative.”