Ken Simonson, chief economist of The Associated General Contractors of America, said construction activity through July showed widespread improvement compared to the first seven months of 2004 but the devastation wrought by Hurricane Katrina will have varied impacts on construction markets for the rest of 2005 and into 2006. Simonson was commenting on the Census Bureau's report that the value of construction put in place in July totaled $1.1 trillion at a seasonally adjusted annual rate, unchanged from the June total that was 9.3 percent higher than January through July 2004.

"The gains were well distributed," Simonson said. "Private residential construction climbed 12 percent year-to-date, private nonresidential was up 5.3 percent and public construction was 5.8 percent higher.

"Within the private residential market, multi-family construction jumped 20 percent, nearly twice the growth rate for single-family and improvements," he added.

Manufacturing construction continued to lead the private nonresidential category with a 27 percent year-to-date advance, followed by "multi-retail" (general merchandise stores, shopping centers and shopping malls), 23 percent, communications, 12 percent and lodging, 9.4 percent. The leading public categories, educational and highways and streets, were up 5.9 and 7.2 percent, respectively.

"These figures overstate ‘real' growth because they don't adjust for a large run-up that has occurred in the cost of cement, steel, copper, gypsum, and petroleum-based inputs," Simonson continued. "Unfortunately, Katrina will push many of these costs much higher. Contractors use a lot of diesel fuel for off-road equipment, their own trucks, and the multitude of deliveries of materials and equipment. Petroleum or natural gas is a key ingredient in asphalt, roofing materials, plastic pipe and insulation. And energy costs are built into the price of mining, milling, making, molding, and transporting metals, concrete and most other construction materials.

"Cement was already in short supply in 32 states and the District of Columbia last month," Simonson noted. "The disruption to ocean, barge and rail transport from Katrina, and the loss of power to cement plants in the storm's path, will cut further into cement supplies. At the same time, the urgent need to stabilize and rebuild roads, other infrastructure and buildings will increase demand for cement and other materials.

"We have been urging the Commerce Department and the Southern Tier Cement Committee to reach immediate agreement on a way to allow Mexican cement into the Gulf states without the punitive 55 percent duty now in place," Simonson said. "Now the need for that cement is truly critical."