WASHINGTON, DC-Like the economy with its sometimes-conflicting indicators, it is hard to get a handle on the future direction of commercial construction. Certainly the latest set of data, provided by a new report from Cassidy Turley does not point to any one definitive conclusion.

For example, the Commerce Department just reported that nationwide housing starts rose 15% to a seasonally adjusted annual rate of 658,000 units in September, with multifamily sector leading the drive, with a 51.3% increase. 

However, National Association of Home Builders chief economist David Crowe tells GlobeSt.com that this may be a one-off blip. “The number of construction permits and other indications suggest a more moderate growth,” he says.

Then there is the Architecture Billings Index, which appears to have faked the industry out yet again. Last month this leading indicator, which reflects the approximate nine to twelve month lag time between architecture billings and construction spending, raised hopes by jumping six points to 51.4, after lagging for several months.

Now the American Institute of Architects reports the September ABI score dropped again, to 46.9. The new projects inquiry index was 54.3, down from a reading of 56.9 the previous month.
Now for some good news: in a new report, Cassidy Turley says that private sector construction spending, after dipping slightly in July, rose 0.4% in August and is 0.9% higher than its level in August of 2010. Now that the dust is settling following the uncertainty surrounding the debt ceiling debate and the S&P downgrade, Cassidy Turley concludes, projects appear to be moving forward again--with the caveat that they are limited to major metro areas and speculative development is more the exception than the rule. Also, Cassidy Turley says, even with an expected pick up, construction is likely to remain at 10 to 15 year lows.

Unfortunately, a report from the Associated General Contractors of America throws a cold bucket of water on hopes that a similar uptick may be seen in the public construction spending arena.

It points to a new federal tax withholding measure, set to go into effect in 2013, that requires federal and state agencies, municipalities and school districts to withhold 3% of every payment to contractors until contractors finalize their tax returns for the year.

AGCA offers up some quick math to make its case: 55% of construction firms report that public projects accounted for more than half of their revenue in 2010. Meanwhile, 63% of firms report that their average profit margin for public projects was less than 3%. This will force contractors to carry a loss on public work for months at a time, officials added.

“The more contractors are forced to temporarily plug budget holes, the more the economy will suffer,” Stephen E. Sandherr, the association’s CEO, said in a prepared statement. “This is nothing but an interest-free loan from contractors back to the federal government.”

A whopping 97% of firms surveyed by the association report the tax measure will make it harder and more expensive to attract capital and bond projects.