The U.S. Census Bureau announced that construction spending during August 2019 was estimated at a seasonally adjusted annual rate of $1,287.3 billion, 0.1% (±1.2%) above the revised July estimate of $1,285.6 billion. The August figure is 1.9% (±1.8%) below the August 2018 estimate of $1,312.2 billion.
During the first eight months of this year, construction spending amounted to $851.3 billion, 2.3% (±1.2%) below the $871.3 billion for the same period in 2018.
In August, the estimated seasonally adjusted annual rate of public construction spending was $332.3 billion, 0.4% (±2.0%) above the revised July estimate of $330.8 billion. Highway construction was at a seasonally adjusted annual rate of $98.9 billion, 0.6% (±4.8 percent) above the revised July estimate of $98.3 billion. Educational construction was at a seasonally adjusted annual rate of $77.0 billion, 1.4% (±2.6%) above the revised July estimate of $75.9 billion.
Among the three largest public categories, spending in the first eight months of 2019 climbed 10.8% compared to the same period in 2018 for highway and street construction spending, 0.9% for educational construction and 9.3% for transportation (airports, transit, rail and port) projects.
Construction spending on public safety is up 13.5% on a year-over-year basis and spending in the sewage/waste disposal category is up nearly 19%. State and local governments continue to benefit from an economy that has pushed property tax, sales tax and income tax collections higher. Low borrowing costs also serve as an inducement to leverage revenues with debt, resulting in more infrastructure spending.
Spending on private construction was at a seasonally adjusted annual rate of $955.0 billion, nearly the same as (±0.8%) the revised July estimate of $954.8 billion.
- Residential construction was at a seasonally adjusted annual rate of $507.2 billion in August, 0.9% (±1.3%) above the revised July estimate of $502.5 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $447.9 billion in August, 1.0% (±0.8%) below the revised July estimate of $452.3 billion.
“Nonresidential construction spending is down nearly 3% from its peak in April 2019 due to declines in private construction,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Construction spending in the commercial category, which encompasses retail space among other segments, is down nearly 12% on a year-over-year basis. Spending related to lodging, including new hotel construction, was down 0.7% for the month and is up less than 4% year-over-year. Spending in the power segment also decreased in August and is down 3.5% compared to the same time last year.
“All of this is consistent with a slowing economy, especially as measures such as industrial production and capacity utilization remain stagnant,” said Basu. “While this could be attributed to trade wars and a slowing global economy, construction dynamics are rarely so simple. Another likely explanation is that America’s growing shortage of skilled construction workers has driven up the cost of delivering construction services, even in the context of flat materials prices, resulting in more project owners delaying projects.”
“Eighty percent of the nearly 2,000 contractors responding to our workforce survey this summer reported difficulty filling hourly craft positions,” said Ken Simonson, Associated General Contractors of America chief economist. “Of the firms experiencing staffing challenges, almost half – 44% – said that projects had taken longer than anticipated. Those delays may be one reason that spending put in place is lagging, even though contractors almost universally report they are busy and would be doing even more projects if they could find enough workers.”
“Construction firms are using a variety of strategies – raising pay, increasing training and becoming more efficient – to cope with labor shortages,” said Stephen E. Sandherr, the association’s chief executive officer. “Public officials can help by doubling investments in career and technical education and permitting more immigrants with construction skills to legally enter the country.”