Construction Spending Is Up, But Concerns Linger On…

Late last week the Association of General Contractors announced that construction spending had reached a six year high, matching levels last seen in December of 2008. Increased spending figures are certainly an encouraging sign of economic recovery and growth. Further, spending for both commercial and residential projects are forecast to continue growth beyond 2014.

Despite this positive news, many believe the current rate of construction industry growth is insufficient to buoy the growth of the economy at large. On Monday, former Federal Reserve Chairman Alan Greenspan shared his view that economic recovery is actually being hindered by inadequate construction growth, going to so far as to call the construction industry “dead in the water”. Greenspan’s concern stems from housing starts sitting far below historical averages, particularly  when contrasted with starts during periods of economic recovery.

Further, Greenspan believes that the general atmosphere of corporate uncertainty regarding the future is partially at fault for construction’s woes. Because businesses have doubts about the future, they are unwilling to invest in capital intensive projects, leaving construction firms without potential work.

While construction growth and construction spending are at their post-recession peaks, they both need to grow faster to bolster the economy, which will in turn create more construction growth.

Fingers crossed that the last quarter of 2014 will be a good one!

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