The U.S. Census Bureau announced that construction spending during August 2018 was estimated at a seasonally adjusted annual rate of $1,318.5 billion, 0.1 percent (±1.6 percent) above the revised July estimate of $1,317.4 billion. The August figure is 6.5 percent (±2.0 percent) above the August 2017 estimate of $1,237.5 billion.
In August, the estimated seasonally adjusted annual rate of public construction spending was $316.7 billion, 2.0 percent (±2.8 percent) above the revised July estimate of $310.5 billion. Highway construction was at a seasonally adjusted annual rate of $99.0 billion, 1.7 percent (±6.9 percent) above the revised July estimate of $97.3 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,001.7 billion, 0.5 percent (±1.0 percent) below the revised July estimate of $1,006.9 billion.
- Residential construction was at a seasonally adjusted annual rate of $548.9 billion in August, 0.7 percent (±1.3 percent) below the revised July estimate of $553.0 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $452.9 billion in August, 0.2 percent (±1.0 percent) below the revised July estimate of $453.9 billion.
“Nearly all categories of construction spending continued to expand through August,” said Ken Simonson, chief economist of the Associated General Contractors of America. “Furthermore, growth is well-balanced among public, private nonresidential and residential projects. But contractors are increasingly worried about a shortage of skilled workers.”
During the first eight months of this year, construction spending amounted to $862.0 billion, 5.3 percent (±1.3 percent) above the $818.7 billion for the same period in 2017.
Spending year-to-date through the first eight months of 2018 was 7.0 percent higher than in January through August 2017 for public construction and 4.8 percent for private construction.
The largest public categories recorded year-to-date gains of 6.4 percent for highway construction, 1.0 percent for educational construction and 15.9 percent for transportation construction.
“The good news on the nation’s economy and the construction sector just keeps coming,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The increase in overall nonresidential construction spending was reasonably predictable given the predominance of positive leading indicators such as ABC’s Construction Backlog Indicator, which reported record-setting 9.9 months of backlog in the second quarter of this year, and the Architectural Billings Index. In addition, the recent pattern of stable private construction spending coupled with growing public spending remained in place in August.
“Rising property values, ongoing rapid job creation and a confident consumer translates into rising real estate values, income and retail sales tax collections, which in turn creates additional resources to invest in infrastructure,” said Basu. “That helps explain the chunky year-over-year spending increases in a number of primarily publicly financed categories, including water supply, which increased 37 percent; conservation and development, 34 percent; transportation, 23 percent; and highway/street, 14 percent.
“It is quite possible that construction spending growth will accelerate from current levels,” said Basu. “Aside from the strong economy, ongoing increases in materials prices and worker compensation is translating into rising project delivery costs, which, all things being equal, produces faster construction spending growth.
“For now, rising construction and borrowing costs are not stifling economic activity,” said Basu. “However, purchasers of construction services may be increasingly inclined to postpone projects if costs continue to rise, which is likely. And while contractors remain concerned about the overall construction workforce shortage negatively affecting project deadlines, the near-term outlook remains robust.”