Construction Spending Flat in August; Highways Up

The U.S. Census Bureau announced that construction spending during August 2021 was estimated at a seasonally adjusted annual rate of $1,584.1 billion, virtually unchanged from (±1.0%) the revised July estimate of $1,584.0 billion. The August figure is 8.9% (±1.5%) above the August 2020 estimate of $1,455.0 billion. During the first eight months of this year, construction spending amounted to $1,034.5 billion, 7.0% (±1.0%) above the $966.7 billion for the same period in 2020.

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In August, the estimated seasonally adjusted annual rate of public construction spending was $341.9 billion, 0.5% (±1.6%) above the revised July estimate of $340.3 billion. Highway construction was at a seasonally adjusted annual rate of $98.3 billion, 1.6% (±4.4%) above the revised July estimate of $96.8 billion. Educational construction was at a seasonally adjusted annual rate of $79.8 billion, 1.1% (±2.0%) above the revised July estimate of $78.9 billion. 

Spending on private construction was at a seasonally adjusted annual rate of $1,242.2 billion, 0.1% (±0.5%) below the revised July estimate of $1,243.7 billion. 

  • Residential construction was at a seasonally adjusted annual rate of $786.6 billion in August, 0.4% (±1.3%) above the revised July estimate of $783.5 billion. 
  • Nonresidential construction was at a seasonally adjusted annual rate of $455.6 billion in August, 1.0% (±0.5%) below the revised July estimate of $460.2 billion.

“Nearly every nonresidential spending segment has deteriorated from already inadequate 2020 levels in the first two-thirds of this year,” noted Ken Simonson, Associated General Contractors of America chief economist. “Meanwhile, soaring materials costs mean that fixed public budgets buy even less infrastructure than before.”

Most infrastructure categories posted significant year-to-date declines, Simonson pointed out. The largest public infrastructure segment, highway and street construction, was 3.4% lower than in January-August 2020. Spending on public transportation construction slumped 6.5% year-to-date. Investment in sewage and waste disposal structures climbed 3.8%, while funding for public water supply projects slid 1.8 % and conservation and development construction plunged 18%.

“The nonresidential construction spending data are among the most interesting to monitor as the economy continues to wrestle with COVID-19, supply chain disruptions and rampant uncertainty regarding the direction of federal policymaking,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “First, nonresidential construction spending dynamics are shaped by all of the major forces shaping economic outcomes today, including labor shortages, surging input prices, massive liquidity and wavering confidence.

“Second, despite the many challenges they have faced, contractors continued to express confidence regarding near-term prospects until recently, per ABC’s Construction Confidence Index,” said Basu. “For economists, who have been focused on phenomena such as the growing volatility of asset prices, rising freight costs, ongoing lockdowns in parts of the global economy and still-high infection rates in America, that expression of abundant confidence has been somewhat surprising. Today’s data release reminds us that challenges abound, with the trajectory of the nonresidential segment remaining on a downward trend that has now been in place for many months.

“Third, a growing number of contractors indicate that the combination of increasingly expensive labor and rising materials prices are inducing more project owners to postpone work,” said Basu. “This has manifested itself in a number of ways, including the inability of nonresidential construction spending to achieve growth and a recent decline in backlog, as measured by ABC’s Construction Backlog Indicator. As if this were not enough, a bipartisan infrastructure package that appeared set to pass is now jeopardized by jumbled political dynamics.”

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