Construction spending during October 2017 was estimated at a seasonally adjusted annual rate of $1,241.5 billion, 1.4 percent (±1.5 percent) above the revised September estimate of $1,224.6 billion, according to the The U.S. Census Bureau. The October figure is 2.9 percent (±1.6 percent) above the October 2016 estimate of $1,206.6 billion.
Highway construction was at a seasonally adjusted annual rate of $86.8 billion, 1.1 percent (±6.3 percent) above the revised September estimate of $85.9 billion.
During the first 10 months of this year, construction spending amounted to $1,029.6 billion, 4.1 percent (±1.2 percent) above the $988.8 billion for the same period in 2016.
Spending on private construction was at a seasonally adjusted annual rate of $949.9 billion, 0.6 percent (±0.8 percent) above the revised September estimate of $943.8 billion.
- Residential construction was at a seasonally adjusted annual rate of $517.7 billion in October, 0.4 percent (±1.3 percent) above the revised September estimate of $515.4 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $432.2 billion in October, 0.9 percent (±0.8 percent) above the revised September estimate of $428.4 billion.
In October, the estimated seasonally adjusted annual rate of public construction spending was $291.6 billion, 3.9 percent (±2.6 percent) above the revised September estimate of $280.7 billion. Educational construction was at a seasonally adjusted annual rate of $79.0 billion, 10.9 percent (±2.5 percent) above the revised September estimate of $71.2 billion.
“One could scarcely imagine circumstances more consistent with rapid growth in nonresidential construction spending,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The U.S. economy is humming, coming up on two consecutive quarters of 3 percent growth on an annualized basis. Consumers, who have been the driving force of the recovery to date, are more confident than they have been in 17 years.
“Stock prices have surged, due in part to liquidity swirling around the growth,” said Basu. “The worldwide economy has not been this healthy for roughly eight decades and global policymakers continue to pursue pro-growth agendas. Interest rates remain extraordinarily low, resulting in greater demand for assets that have the capacity to generate significant income, including commercial real estate. On top of this, there are hopes in corporate America for tax reform, which would presumably accelerate economic growth and bolster corporate profitability.
“In October, nonresidential construction spending rose as one might expect given broader macroeconomic dynamics. There were even signs of life in certain publicly financed categories,” said Basu. “It is likely that construction growth will pick up further next year due to numerous factors, including growing confidence among policymakers in rapidly expanding communities. That confidence should translate into more spending on public works. Of course, whether this logic prevails will depend in part on tax reform legislation outcomes in Congress.”
While overall construction spending reached a record high in October, public-sector investments in infrastructure continued to lag earlier levels, according to the Associated General Contractors of America. Association officials said federal, state and local officials should address the growing shortfall in transportation, water and wastewater infrastructure in the interests of economic growth and public health and safety.
“There was healthy growth this October in both public and private construction spending, with an exceptionally strong surge in public educational construction,” said Ken Simonson, the Associated General Contractors of America’s chief economist. “But for the first 10 months of 2017 combined, public investment – specifically in infrastructure – has fallen short of the already inadequate amounts posted in the same period of 2016.”
In contrast to the increase between September and October, public construction spending year-to-date shrank 3.4 percent from January through October combined, compared with the same months of 2016, with year-to-date losses concentrated in infrastructure categories, Simonson noted. Public spending year-to-date on highway and street construction declined 4.3 percent from 2016; spending on transportation (transit, airports, rail and ports) slipped 1.6 percent; investment in sewage and waste disposal tumbled 15.9 percent; and water supply construction dollars plunged 9.6 percent.
In contrast to infrastructure spending, which generally depends in part on federal funds, school and university construction – funded largely by local property taxes and tuition, respectively – climbed 2.2 percent from 2016 to 2017. Private construction spending fared better, the economist pointed out. Private residential spending rose 11.2 percent year-to-date, with gains for new single-family construction (9.0 percent), multifamily (3.9 percent) and improvements to existing housing (17.2 percent).
Private nonresidential spending year-to-date edged up 1.5 percent. The largest private nonresidential category, power (electric power plus oil and gas field and pipeline construction) declined 2.5 percent year-to-date, while the second-largest segment, commercial (retail, warehouse and farm construction) soared 14.7 percent as warehouse construction boomed.
Association officials called on federal, state and local officials to boost funding for infrastructure. The officials said that new infrastructure funding is vital for supporting economic growth, as well as public health and safety.
“It is essential to increase the nation’s investment in roads and other transportation facilities to keep the economy growing,” said Stephen E. Sandherr, the association’s chief executive officer. “And investment in safer highways, drinking water and wastewater systems are important for public safety and health.”