The U.S. Census Bureau announced that construction spending during January 2021 was estimated at a seasonally adjusted annual rate of $1,521.5 billion, 1.7% (±0.7%) above the revised December estimate of $1,496.5 billion. The January figure is 5.8% (±1.0%) above the January 2020 estimate of $1,437.7 billion.
In January, the estimated seasonally adjusted annual rate of public construction spending was $361.5 billion, 1.7%(±1.2%) above the revised December estimate of $355.5 billion. Highway construction was at a seasonally adjusted annual rate of $107.8 billion, 5.8% (±3.1%) above the revised December estimate of $101.9 billion. Educational construction was at a seasonally adjusted annual rate of $89.9 billion, 0.1% (±1.3%) below the revised December estimate of $90.0 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,160.0 billion, 1.7% (±0.5%) above the revised December estimate of $1,140.9 billion.
Residential construction was at a seasonally adjusted annual rate of $713.0 billion in January, 2.5% (±1.3%) above the revised December estimate of $695.7 billion.
Nonresidential construction was at a seasonally adjusted annual rate of $447.0 billion in January, 0.4% (±0.5%) above the revised December estimate of $445.2 billion.
“Despite a modest upturn in January, spending on private nonresidential construction remained at the second-lowest level in more than three years and was 10% below the January 2020 spending rate,” said Ken Simonson, Associated General Contractors of America (AGC) chief economist. “All 11 of the private nonresidential categories in the government report were down, compared to a year earlier.”
Association officials said that many construction firms report they are being squeezed by rising materials prices, particularly for lumber and steel, yet are having a hard time increasing what they charge to complete projects. They urged the Biden administration to explore ways to boost domestic supply and eliminate trade barriers for those key materials. They also cautioned that the proposed PRO Act and its significant changes to current labor laws could undermine labor harmony at a time when the industry is struggling to rebound.
“Contractors are getting caught between rising materials prices and stagnant bid levels,” said Stephen E. Sandherr, AGC’s chief executive officer. “Add to that the possible threat of a new era of labor unrest, and many contractors are worried that the recovery will end before it really starts.”
“It is remarkable that overall nonresidential construction spending has stabilized recently despite the lingering impacts of the COVID-19 pandemic,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “January 2021’s construction spending data line up with the Construction Backlog Indicator produced by ABC, which indicates that backlog is stabilizing and that many nonresidential contractors expect both sales and staffing levels to expand over the next six months.
“There are some key caveats, however,” said Basu. “Private nonresidential construction remains soft in the context of compromised commercial real estate fundamentals. Construction spending in the lodging segment is down nearly 23% over the past year, and office construction spending is down both on both a monthly and yearly basis. The trajectory of remote work, business travel and brick-and-mortar retail is still uncertain, so construction spending in a large number of private categories is poised to remain soft for the foreseeable future.
“There is at least one additional consideration that serves as a bit of a damper in what was an otherwise decent construction spending report for January,” said Basu. “The rise in construction spending in January could largely reflect rising materials prices and efforts by contractors to pass at least some of those increases to purchasers of construction services. It comes as little surprise that many of the contractors who expect rising sales and staffing levels during the first half of 2021 also anticipate shrinking margins.”