Construction Spending Ticks Upward

Construction spending in September totaled $1.219 trillion at a seasonally adjusted annual rate, an increase of 0.3 percent from the August total and up 2 percent from a year earlier, according to the U.S. Census Bureau.

During the first nine months of this year, construction spending amounted to $917.0 billion, 4.3 percent (±1.2 percent) above the $879.6 billion for the same period in 2016.

Highway construction was at a seasonally adjusted annual rate of $84.3 billion, 1.1 percent (±5.6 percent) above the revised August estimate of $83.4 billion; but is down 7.4 percent from a year earlier.

“The ongoing economic expansion is a favorable sign for private residential and nonresidential construction,” said Ken Simonson, chief economist for the Associated General Contractors of America (AGC). “But lawmakers continue to underfund public investment.”

“There is a lot of positive news about the U.S. economy right now,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The nation has added nearly 1.8 million net new jobs over the past year, the official unemployment rate stands at a 16-year low and asset prices have skyrocketed. Those factors have given American household wealth a boost. Despite all of that, nonresidential construction spending is down on a year-over-year basis by nearly 3 percent. Much of this is due to declining public spending in water supply and other public sector categories.”

Simonson noted that while a good number of categories had gains for the year, total spending on manufacturing, water systems, highway and street and commercial construction experienced significant declines for the year.

Private nonresidential spending declined by 0.8 percent in September and was 3.8 percent below the September 2016 level. The largest private nonresidential segment was power construction (including oil and gas field and pipeline projects), which declined by 1.4 percent for the month and 9.1 percent from September 2016 to September 2017. 

The next-largest segment, commercial (retail, warehouse and farm) construction, fell 1.0 percent for the month but is up 11.7 percent year-over-year. Manufacturing construction dropped by 3.6 percent for the month and 20.5 percent from a year earlier. Private office construction decreased 1.1 percent from August and by 7.4 percent since September 2016.

Public construction spending climbed 2.6 percent from the prior month but is down by 1.6 percent from September 2016 to September 2017. Among public infrastructure categories other than highway construction, spending on transportation facilities such as transit and airport construction rose 5 percent for the month but slipped 1 percent year-over-year; spending on sewage and waste disposal fell by 0.1 percent and 9.7 percent, respectively; and spending on water supply dropped 0.4 percent in September and 8.3 percent year-over-year. Public educational construction was up 5.2 percent in September and up 6.0 percent over 12 months.

Private residential construction spending was flat between August and September but is up 9.6 percent over the year. Spending on multifamily residential construction grew 0.6 percent in September and 0.9 percent from a year ago, while single-family was up 0.2 percent for the month and 11.9 percent from the September 2016 rate.

AGC officials said that public sector investments in construction remain down for the year despite overall robust economic growth means maintenance and improvements will lag even as greater economic activity puts more wear on roads, bridges and other public works. They said Congress and the President have a great opportunity to improve infrastructure by including new investments as part of the pending tax reform measure.

“All of this is consistent with the notion that proposed policy initiatives that would better support U.S. economic growth remain important even in the context of an improving economy,” said Basu. “Beyond the tax reform initiative currently in the spotlight, one hopes that an infrastructure-led stimulus package funded primarily by private investors receives more focus during the months to come.”

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