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Why Construction Isn't Following the General Economic Growth Trend

Why Construction Isn't Following the General Economic Growth Trend

January 4, 2011

In the recent MDM Webcast, The 2011 Economic Forecast, Ken Simonson, chief economist of the Associated General Contractors of America, said that while he has seen some signs of improvement in construction, overall it remains a "grim market."

So why has construction continued to drag, while the rest of the economy continues to post gains? Simonson outlined a couple of reasons:

  1. "We had such a deep and long recession that there is still a huge amount of warehouse spaces," he said. In other words, available inventory is abundant, slowing the need for new construction.
  2. The public market has been hurt by a huge downturn in state and local tax receipts. "Even as those start to improve in the last few quarters, in some parts of the country there's still so many other priorities ahead of construction," he said. Those include restoring services and ending furloughs for employees.

That said, in the webcast Simonson said he expected that construction spending would bottom out in 2010, and that we would see modest gains in construction in 2011.

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