The U.S. Census Bureau of the Department of Commerce announced that construction spending during September 2016 was estimated at a seasonally adjusted annual rate of $1,150.0 billion, 0.4 percent (±1.3 percent) below the revised August estimate of $1,154.4 billion. The September figure is 0.2 percent (±1.8 percent) below the September 2015 estimate of $1,152.1 billion.
Highway construction was at a seasonally adjusted annual rate of $86.6 billion, 0.9 percent (±5.4 percent) above the revised August estimate of $85.8 billion.
During the first nine months of this year, construction spending amounted to $863.2 billion, 4.4 percent (±1.2 percent) above the $826.8 billion for the same period in 2015.
“Construction spending remained in a yearlong holding pattern in September as declining public outlays offset strong growth in multifamily spending and several private nonresidential categories,” according to an analysis of the data by the Associated General Contractors of America. Association officials said declining investments in public infrastructure are undermining the sector’s recovery and urged Congress to act on pending water resources legislation and voters to support ballot measures designed to rebuild aging infrastructure.
“There is still plenty of oomph in private demand for construction and growing support for school construction, but public infrastructure investment is crumbling just when it is needed most,” said Ken Simonson, the association’s chief economist. “These conflicting trends have left total construction spending nearly flat for the past 15 months.”
Simonson added that the year-to-date total for January through September 2016 compared to the first nine months of 2015 remains positive, with an overall increase of 4.4 percent despite a deterioration in public spending, thanks to gains in private nonresidential and residential spending.
Public construction spending declined 0.9 percent from a month before – the sixth decrease in the past seven months – bringing the year-to-date total for the first nine months of 2016 down 2.2 percent from the same period in 2015.
Public educational spending rose 3.8 percent year-to-date but public infrastructure spending declined across-the-board. Public spending on highway and street construction slipped 0.7 percent; other transportation facilities such as transit and airports dropped 4.8 percent; sewage and waste disposal slumped 8.9 percent; water supply fell 8.3 percent; and conservation and development declined 4.5 percent.
Association officials said that even though a handful of states have recently passed measures to increase investments in infrastructure, many other states have cut back on their funding for public works. They urged voters to approve state and local funding measures to repair aging infrastructure. They also urged Congress to enact legislation to finance repairs to the nation’s aging waterways and port systems.
“Public-sector funding cuts for infrastructure aren’t just hurting the construction industry, they are also slowing commutes and undermining quality of life in many communities,” said Stephen E. Sandherr, the association’s chief executive officer. “Voters should send a strong message that they want to drive better roads, drink better water and learn in better facilities.”
Spending on private construction was at a seasonally adjusted annual rate of $879.7 billion, 0.2 percent (±1.0 percent) below the revised August estimate of $881.6 billion. Residential construction was at a seasonally adjusted annual rate of $453.7 billion in September, 0.5 percent (±1.3 percent) above the revised August estimate of $451.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $426.0 billion in September, 1.0 percent (±1.0 percent) below the revised August estimate of $430.2 billion.
“Since late 2015, the level of nonresidential construction spending in America has been effectively flat,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Undoubtedly, soft U.S. economic growth has had an impact on nonresidential construction spending growth. For several quarters prior to the third quarter of 2016, U.S. economic growth hovered around 1 percent.
“However, public policy has also played a large part in shaping trends in nonresidential construction,” said Basu. “A number of primarily publicly financed construction segments have experienced declines in spending over the past year, including sewage and waste disposal (-18.8 percent), water supply (-13.7 percent), public safety (-13.0 percent) and transportation (-11.3 percent). Meanwhile, the level of construction spending in office, lodging and commercial segments is up on a year-over-year basis, though spending in the office and commercial categories was down on a month-over-month basis and lodging-related construction was roughly flat.
“It is conceivable that uncertainty regarding federal, state and local elections is negatively impacting state and local government infrastructure spending,” said Basu. “That uncertainty causes projects to be shelved. However, it is also possible that governments are shifting resources away from capital spending and toward other priorities, including surging Medicaid expenditures, rising compensation costs and underfunded pensions.
“Private spending growth in a number of categories softened a bit in September, perhaps because commercial real estate lenders have become increasingly concerned about potential overbuilding in certain segments and geographies,” warned Basu. “The implication is that nonresidential construction spending growth may not accelerate anytime soon, though there is some hope that the period following the elections will usher forth a period of renewed spending growth.”