The U.S. Census Bureau reported that construction spending during June 2019 was estimated at a seasonally adjusted annual rate of $1,287.0 billion, 1.3% (±1.2%) below the revised May estimate of $1,303.4 billion.
The June figure is 2.1%(±1.6%) below the June 2018 estimate of $1,314.8 billion. During the first six months of this year, construction spending amounted to $615.8 billion, 0.5 % (±1.2%) below the $619.0 billion for the same period in 2018.
In June, the estimated seasonally adjusted annual rate of public construction spending was $324.1 billion, 3.7%(±2.0%) below the revised May estimate of $336.4 billion. Highway construction was at a seasonally adjusted annual rate of $101.9 billion,6.4%(±5.4%) below the revised May estimate of $108.9 billion.
Spending in the first half of 2019 was up sharply for most public infrastructure, with year-to-date increases of 14.5% for highway and street construction spending, 7.1% for transportation (airports, transit, rail and port) spending, 16.2% for sewage and waste disposal, 15.1% for water supply and 12.2% for conservation and development.
- Spending on private construction was at a seasonally adjusted annual rate of $962.9 billion, 0.4% (±0.8%) below the revised May estimate of $967.0 billion.
- Residential construction was at a seasonally adjusted annual rate of $507.2 billion in June,0.5% (±1.3%) below the revised May estimate of $509.7 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $455.7 billion in June,0.3% (±0.8%) below the revised May estimate of $457.3 billion.
“Although the initial estimates for spending in June show decreases from May in all major categories, the first half of 2019 as a whole has been positive, aside from single-family construction,” said Ken Simonson, Associated General Contractors of America chief economist. “The initial monthly estimates have mostly been revised upward, making the six-month year-to-date totals a more reliable indicator of underlying trends.”
Association officials said that one reason construction spending declined between May and June is because contractors cannot find enough qualified workers to keep pace with demand. They noted that 78% of construction firms reported earlier this year having a hard time finding enough qualified workers to hire. As a result, the drop in construction spending in some categories in June likely reflects the fact firms are turning down or delaying projects until they have enough people on hand to do the work.
“The reason construction workforce shortages are a problem is their potential to undermine broader economic growth,” said Stephen E. Sandherr, the association’s chief executive officer. “That is why Congress and the administration should boost funding for career and technical education and make Pell Grants eligible for students studying construction at career and technical colleges.”
Associated Builders and Contractors Chief Economist Anirban Basu said that nonresidential construction spending appears to be softening, albeit gradually. “Private nonresidential construction spending has been trending lower for several months, and segments like office and lodging are no longer the drivers of construction spending growth that they had been, likely due to growing concerns about market saturation,” he said.
“The dip in public construction may have been merely temporary, which is likely the case given the ongoing strength of state and local government finances,” said Basu. “And with the economy still adding substantial numbers of jobs, wages growing at or near a decade-high pace, consumers continuing to spend and property values remaining stable, local and state governments should continue to experience solid income, retail and real estate tax collections. All things being equal, that should help fuel infrastructure outlays, especially given still very low borrowing costs.
“While many observers continue to focus on issues such as trade disputes, high levels of corporate debt and asset prices that are susceptible to sharp declines, the U.S. construction industry’s most significant source of uncertainty may be the pending insolvency of the Highway Trust Fund,” said Basu. “That insolvency is now a mere two years away, and if policymakers fail to act expeditiously, state and local policymakers may choose to postpone certain projects given the rising uncertainty of federal funding. The highway/street and transportation categories are especially vulnerable to such dynamics.”