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U.S. Construction Forecast Lowered on Lack of Public Spending

July 25 (Bloomberg) -- Spending on non-residential construction in the U.S. will be less than initially projected as state and local governments scale back investments in such properties as schools and health-care buildings, the American Institute of Architects said.

Total spending on commercial and institutional development probably will increase 4.9 percent this year, down from an earlier estimate of 5.8 percent, according to a semi-annual survey by the Washington-based group.

A slowdown in funding for institutional projects, which include education, health-care, religious and public-safety facilities, has been a drag on the recovery of the wider industry, according to Kermit Baker, the AIA’s chief economist. The group expects institutional-construction spending to fall 0.1 percent this year, compared with January’s projection for an increase of 3.4 percent, Baker said.

While growth in institutional construction tends to lag behind commercial building, “it has been even more delayed than previously expected because of fiscal problems on the local and state level and some uncertainties, such as around the new affordable health-care act,” Baker said. “There isn’t a lot of appetite to build new facilities.”

In the commercial-construction category, which includes hotels, offices and retail and industrial buildings, spending probably will climb 9.9 percent, down from the earlier estimate of 10.3 percent, the AIA said.

“Lending standards at financial institutions continue to fall well short of the increasing demand for commercial real estate loans,” Baker said in the report. That’s “a source of concern for the entire industry.”

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