The U.S. Census Bureau reported that construction spending in July was estimated at a seasonally adjusted annual rate of $1,315.4 billion, 0.1 percent (±1.5 percent) above the revised June estimate of $1,314.2 billion.
The July figure is 5.8 percent (±1.8 percent) above the July 2017 estimate of $1,242.8 billion. During the first seven months of this year, construction spending amounted to $740.5 billion, 5.2 percent (±1.2 percent) above the $703.7 billion for the same period in 2017.
In July, the estimated seasonally adjusted annual rate of public construction spending was $304.5 billion, 0.7 percent (±3.0 percent) above the revised June estimate of $302.3 billion.
Highway construction was at a seasonally adjusted annual rate of $94.2 billion, 0.4 percent (±7.1 percent) above the revised June estimate of $93.8 billion. Educational construction was at a seasonally adjusted annual rate of $71.6 billion, 2.1 percent (±5.9 percent) above the revised June estimate of $70.1 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,010.9 billion, 0.1 percent (±0.7 percent) below the revised June estimate of $1,011.9 billion.
- Residential construction was at a seasonally adjusted annual rate of $560.1 billion in July, 0.6 percent (±1.3 percent) above the revised June estimate of $556.7 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $450.9 billion in July, 1.0 percent (±0.7 percent) below the revised June estimate of $455.3 billion.
“It is striking how balanced the growth in construction spending has been so far this year,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Spending totals for the first seven months of 2018 combined nearly match those for the same period of 2017. Contractors are optimistic that demand for projects will continue but many report that workforce shortages are leading to longer construction schedules and higher costs.”
Most major segments had gains, Simonson observed. The largest public categories recorded year-to-date gains of 3.6 percent for highway construction, 0.6 percent for educational construction and 14.0 percent for transportation construction.
Of the three private residential spending categories, single-family homebuilding rose 8.5 percent, multifamily dipped 0.9 percent and improvements to existing building climbed 9.4 percent. Among private nonresidential spending niches, the largest – power construction (including oil and gas field and pipeline structures) – edged up 0.4 percent, commercial (retail, warehouse and farm) construction rose 4.7 percent, office construction increased 5.8 percent and manufacturing construction declined 7.2 percent.
“Construction spending dynamics have reversed almost completely during the past 12 to 18 months,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Earlier in the cycle, private construction expanded briskly, driven in part by abundantly available financing at very low interest rates. While private construction volumes continue to be elevated, they are no longer expanding at quite the same rate. For instance, construction spending on lodging and office space barely budged for the month, while commercial construction, such as fulfillment and shopping centers, fell 3.3 percent.
“By contrast, nonresidential construction segments associated with large public components, including conservation and development, education, highway and street, public safety, and sewage and waste disposal all experienced an uptick in spending in July,” said Basu. “Many states are now running budget surpluses for the first time in years, in part due to surging capital gains tax collections. One result is that more public projects are moving forward. As evidence, construction spending in the water supply category is up 29 percent on a year-over-year basis, conservation and development (e.g. flood control) by 24 percent, transportation by nearly 21 percent, public safety-related spending by 17 percent and sewage and waste disposal by 11 percent.
“The implication is that the economy’s strong performance is increasingly translating into infrastructure spending, even in the absence of a federal infrastructure package,” said Basu. “Given recent economic and financial market performance, there is every reason to believe that state and local government finances, though still fragile in many instances, will continue to improve. That strongly suggests public construction spending will continue to progress during the months ahead. In constrast, private construction spending growth is more likely to remain constrained for a number of reasons, including recent increases in private borrowing costs and concerns that segments in certain communities are now overbuilt or approaching overbuilt status.”