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Economists predict slight decline in construction spending this year

  • Author:
  • Updated: September 28, 2016
  • Published January 30, 2015

Construction spending in Alaska is expected to decline slightly in 2015, according to an analysis released Friday by the Institute of Social and Economic Research at the University of Alaska Anchorage.

"Alaska's 2015 Construction Spending Forecast," co-authored by Scott Goldsmith and Pamela Cravez, estimates total spending to be $8.5 billion, down from $8.8 billion in 2014. The report predicts reductions in construction employment, the oil and gas sector, and other private spending.

Spending by federal and state governments is predicted to increase from $2.9 billion to $3 billion in part because of national defense projects. National defense spending had been trending downward recently but will be boosted by an increase in the budget for environmental projects and for Fort Greely, where the addition of interceptor missiles is expected to cost $1 billion in the coming years.

Though the state is facing a budget deficit of $3.5 billion this year mostly due to the drop in oil prices, "there are still billions 'in the pipeline' " from appropriations made in previous years, the report says. That includes general obligation bonds and the record $2.3 billion in state appropriations approved in 2013 that is only now becoming "cash on the street." The backlog of projects should keep state construction spending level this year before tapering off in 2016.

"Cash for investment will be tight this year" in the oil and gas sector, ISER's report says. Corporations will be watching the price of oil carefully and retooling their plans in response to it. But the low oil prices are unlikely to significantly reverse for at least a year.

Based on plans announced by the companies, the authors tally $3.8 billion in construction spending, down 2 percent from last year. However, they expect that some of the projects will be canceled.

Construction jobs will continue to grow but at a very slow rate, the authors say -- less than 1 percent. They also note that Alaska's population has stopped growing.

"Out-migration exceeded in-migration for the second year in a row," the report says.

The annual report prepared for the Construction Industry Progress Fund and the Associated General Contractors of Alaska, underwritten by Northrim Bank, originally set 2014 construction spending at $9.2 billion. That was lowered to $8.8 billion at the end of the year after oil and gas prices started to slide over the summer.

The authors say they are "confident" in their forecast given the information available at the time of publication. However, they suggest Alaskans should anticipate that other wild cards may affect their calculations.

"As always," the report reads, "we can expect some surprises."

Reach Mike Dunham at mdunham@alaskadispatch.com or 257-4332.

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