The news of Friday’s (and later Monday’s) extraordinary jump in consumer spending on the first days of the holiday gift season lifted the stock markets on Monday but the joy lasted only as long as writers could begin looking for the cloud behind the silver lining. The juxtaposition to 2010 is interesting. After a summer driven by fear of European default the news that consumers had increased holiday spending by about five percent sparked a six month rally in stocks on the hope of an economic turnaround. Twelve months later – after a summer of fear aboutEuropeagain – news of an increase in spending that is three times as large sparks…uncertainty about how sustainable that is.
For about six months consumers have been surveyed and responded by saying they had less confidence in the economy’s direction, but at the same time consumers were spending more each month. Similarly, a consumer poll was released Monday that showed that only 10 percent of consumers planned to spend more on the holidays this year, while 42 percent planned to spend less. Either the 10 percent spent a ton more – remember that Black Friday sales jumped over 16 percent – or the consumers answering the survey were saying one thing while doing another.
Yes, this spike in sales could be driven by great deals. Or, the American consumer could have been saving all year for this – while somehow spending more too – and the bump is short-lived. And it’s true that buying a bunch of new consumer goods mostly benefits workers inChinaorMalaysiaorVietnam, not American workers. And certainly, growing consumption that is built upon growing consumer debt isn’t sustainable. All these things and many more could be reasons why a 16 percent jump in holiday sales is really not as good as it sounds, but ask yourself how the reaction to a one percent decline in sales would be greeted.
Business owners and developers are consumers too. When they see empty stores and hear of declining sales they are very unlikely to respond by advancing plans for new construction. A holiday season retail boom doesn’t guarantee another construction boom cycle but it doesn’t hurt either.
On a more regional and objective note…contracting for the first eleven months of 2011 has already exceeded the forecast for the year of $3.2 billion. Housing is still stuck in a slump and will be for at least another year but non-residential construction is cycling up fast. In addition to the surprising overall strength in volume, some high profile projects are proceeding.
A decision should come within the week about the construction manager for CMU’s $65 million nanotech center. UPMC is in the process of seeking project/program management services for its $394 million cancer research center. Mascaro Construction got the nod this week to be the construction manager for the $60 million Cardinal Wuerl North Catholic project. Perhaps the most interesting development is the selectivity being shown by contractors bidding the $90 millionMt.LebanonHigh Schoolproject. Only four generals – Massaro, Mascaro, Whiting-Turner and Nello – are bidding (and no guarantee all will ultimately bid). As a single prime project the job attracted almost twice that many bids early in the year. This time around a handful of those bidders are passing on the project, including low bidder Walsh Construction.