* U.S. construction spending seen at $412 bln in 2012
* Risk of recession higher: McGraw-Hill Construction
* Construction rebound pushed back at least a year
* Government spending cuts a key impediment to recovery
By Nick Zieminski
Oct 19 New spending on U.S. construction, which
has fallen in four of the past five years, is forecast to
remain flat next year at about $412 billion, pushing back an
expected recovery in the sector by another year, according to a
The estimate, by McGraw-Hill Construction, predicts gains
in some construction sectors, such as single-family housing and
apartment buildings, as well as commercial buildings such as
warehouses and hotels.
That will be offset by lower spending on institutional buildings like schools, public works like bridges and roads,
and electric utilities, according to the annual McGraw-Hill
Dodge Construction Outlook.
Factors holding back a recovery include 9.1 percent
unemployment, spending cuts by state, local and federal
governments, and uncertainty caused by the European debt crisis
and the debt limit debate in Washington.
The risk of recession has grown, according to the outlook.
Next year's estimated $412 billion in construction starts
is up slightly from 2011's estimated $410 billion, which marked
a 4 percent drop from the prior year. In 2006 and 2007, before
the economic crisis, total construction spending was well above
McGraw-Hill Construction is a unit of McGraw-Hill Cos Inc . Dodge is the unit's construction database.
"Although there are some positives for single-family
housing and commercial building, both are proceeding from
exceptionally low levels," said Robert Murray, Vice President
of Economic Affairs at McGraw-Hill Construction.
"The biggest impediments near-term are the potential
cutbacks to federal spending and the tight budget situation for
state and local governments," Murray said. Institutional and
public works construction has further room to fall.
"In terms of overall construction, a real rebound will be
pushed back at least a year," he said, until the U.S. economy
sees sustained job creation. "This is the most extended bottom
we've seen in at least the past 30 to 40 years."
Among McGraw-Hill's specific forecasts:
* Spending on single-family homes will rise 10 percent to
$105 billion. But the number of new starts, 435,000, is roughly
one-quarter of the peak earlier this decade, depressed by
* Spending on public works will fall 5 percent to $95
billion, extending a 2011 decline, due to spending cuts and the
lack of a national highway bill.
* Spending on institutional buildings will fall for the
fourth year in a row, to about $92 billion, because of state
and local budget cuts.
* Electric utilities' construction will fall by 24 percent
to $32 billion to $28 billion, after robust growth in 2011.
* The biggest jump wil occur in construction of multifamily
housing, up 18 percent, helped by demographic trends. Because
many Americans cannot afford to buy homes, more people are
being pushed into the rental market.
* Spending on commercial buildings will rise 8 percent to
about $47 billion, with the biggest increases in hotel and
warehouse categories and modest improvement in retail and
Most diversified industrial companies get at least some
revenue from construction. They include Honeywell International
Inc , Tyco International Ltd , Ingersoll Rand Plc
<IR.N, Eaton Corp , Caterpillar Inc , Deere & Co and Terex Corp .