The U.S. Census Bureau announced that in May 2018, construction spending during May 2018 was estimated at a seasonally adjusted annual rate of $1,309.5 billion, 0.4 percent (±1.3 percent) above the revised April estimate of $1,304.5 billion.
The May figure is 4.5 percent (±1.6 percent) above the May 2017 estimate of $1,253.6 billion.
During the first five months of this year, construction spending amounted to $497.1 billion, 4.3 percent (±1.2 percent) above the $476.7 billion for the same period in 2017.
The estimated seasonally adjusted annual rate of public construction spending was $304.1 billion, 0.7 percent (±2.6 percent) above the revised April estimate of $302.1 billion.
- Educational construction was at a seasonally adjusted annual rate of $74.3 billion, 0.9 percent (±2.5 percent) above the revised April estimate of $73.6 billion.
- Highway construction was at a seasonally adjusted annual rate of $94.6 billion, 0.2 percent (±8.1 percent) below the revised April estimate of $94.8 billion, but up 5.8 percent from May 2017 to May 2018.
Spending on private construction was at a seasonally adjusted annual rate of $1,005.4 billion, 0.3 percent (±0.8 percent) above the revised April estimate of $1,002.3 billion.
- Residential construction was at a seasonally adjusted annual rate of $553.8 billion in May, 0.8 percent (±1.3 percent) above the revised April estimate of $549.3 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $451.5 billion in May, 0.3 percent (±0.8 percent) below the revised April estimate of $453.0 billion.
“Public construction spending has increased strongly for the past nine months and is now at the highest level since 2010, led by a rebound in infrastructure investment,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Single-family homebuilding is continuing to expand, while multifamily construction has pulled out of a recent slump, but growth in private nonresidential spending remains modest and inconsistent. However, rising materials costs and shortages of qualified workers may stall all types of projects.”
Association officials noted that rapidly rising materials costs, due in part to new and anticipated tariffs, are likely to make some projects unaffordable. In addition, acute shortages of qualified labor may result in project delays, Stephen E. Sandherr, the association’s chief executive officer, cautioned. He urged Congress to pass a new Perkins Act that increases funding for career and technical education and for the Trump administration to avoid a damaging trade war.
“The prediction has been that publicly financed construction spending would rise in America,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The logic of this is rooted in two basic factors. The first is that the ongoing economic expansion, now in its 10th year, has steadily improved fiscal conditions in state and local government. With more money to spend, more communities are empowered to deal with deferred maintenance and even to expand the capacity of certain key infrastructure, whether roads, mass transit, wastewater treatment plants or water systems.
“The other factor relates to a political cycle,” said Basu. “Increasingly, policymakers have been making the case – and much of the electorate seems convinced – that stepped-up infrastructure investment is needed. Accordingly, in recent years, 31 states have expanded their transportation funding, including 24 of them by raising state gas taxes. Not surprisingly, public construction spending is higher on month-over-month and year-over-year bases.
“What has been less clear is whether privately financed construction would continue to rise,” said Basu. “While the economy remains strong, a number of headwinds have formed, particularly concerns regarding tariffs and trade wars. Construction material prices have already begun to surge, in part because of trade disputes involving materials such as softwood lumber, steel and aluminum. This increases project costs without offering developers and their financiers any offsetting commercial benefit.
“Moreover, fears of a full-blown trade war between the United States and NAFTA partners, the European Union and/or China have likely resulted in some businesses and investors adopting a wait-and-see attitude,” said Basu.