Construction Spending Rises in August; Highway Construction Ticks Up

Construction spending during August 2020 was estimated at a seasonally adjusted annual rate of $1,412.8 billion, 1.4% (±1.0%) above the revised July estimate of $1,392.7 billion. The August figure is 2.5% (±1.5%) above the August 2019 estimate of $1,379.0 billion.

During the first eight months of this year, construction spending amounted to $927.7 billion, 4.2% (±1.2%) above the $889.9 billion for the same period in 2019.

In August, the estimated seasonally adjusted annual rate of public construction spending was $351.4 billion, 0.1% (±1.8%) above the revised July estimate of $350.9 billion. Highway construction was at a seasonally adjusted annual rate of $100.6 billion, 1.9% (±4.6%) above the revised July estimate of $98.7 billion. Educational construction was at a seasonally adjusted annual rate of $82.6 billion, 0.6% (±1.8%) above the revised July estimate of $82.2 billion. 

But eight of 13 public construction categories declined. Despite the increase in August, public construction spending has trended down by 2.5% from its high point in March.

Spending on private construction was at a seasonally adjusted annual rate of $1,061.4 billion, 1.9% (±0.7%) above the revised July estimate of $1,041.7 billion.

  • Residential construction was at a seasonally adjusted annual rate of $589.4 billion in August, 3.7% (±1.3%) above the revised July estimate of $568.3 billion.
  • Nonresidential construction was at a seasonally adjusted annual rate of $472.0 billion in August, 0.3% (±0.7%) below the revised July estimate of $473.4 billion.

“The August spending report shows a stark divide between housing and nonresidential markets that appears likely to widen over the coming months,” said Ken Simonson, Associated General Contractors of America’s chief economist. “With steadily rising business closures and worker layoffs, and growing budget gaps for state and local governments, project cancellations are likely to mount and new starts will dwindle.”

“One of the biggest challenges facing the construction industry is the lack of demand for many new types of commercial and local infrastructure projects, especially after the current crop of projects is completed,” said Stephen E. Sandherr, Associated General Contractors of America’s chief executive officer. “Washington officials can give a needed boost to construction demand and employment by boosting infrastructure and putting in place liability protections for firms that are protecting workers from the coronavirus.”

“While overall construction spending rose significantly in August, much of that was attributed to surging single-family housing starts,” said Associated Builders and Contractors (ABC) Chief Economic Anirban Basu. “The picture is very different in a number of nonresidential construction categories, especially in segments that have been disproportionately impacted by the pandemic, such as lodging and office, which are down 12.1% and nearly 9% year over year, respectively.

“The good news is that nonresidential construction spending momentum remains apparent in a number of public segments,” said Basu. “On a monthly basis, construction spending was up in the water supply, highway/street and educational categories. Spending in the public safety segment is up nearly 40% compared to the same time last year.

“Absent an infrastructure-oriented stimulus package, the likely trajectory of nonresidential construction spending does not appear especially bright,” said Basu. “Commercial real estate fundamentals are poor, with elevated vacancy rates and tighter lending conditions, rendering it probable that private nonresidential construction spending will continue to dip. State and local finances have been pummeled by the pandemic, resulting in less support for the next generation of public projects. Many contractors report declining backlog, according to ABC’s Construction Backlog Indicator, and fewer opportunities to bid on new projects. With winter coming and infection rates poised to rise, the quarters to come are shaping up to be challenging ones.”

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