The U.S. Census Bureau announced that total construction spending during January 2022 was estimated at a seasonally adjusted annual rate of $1,677.2 billion, 1.3% (±0.8%) above the revised December estimate of $1,655.8 billion. The January figure is 8.2% (±1.2%) above the January 2021 estimate of $1,549.8 billion.
In January, the estimated seasonally adjusted annual rate of public construction spending was $350.7 billion, 0.6% (±1.5%) above the revised December estimate of $348.7 billion. Highway construction was at a seasonally adjusted annual rate of $105.3 billion, 0.1% (±4.1%) below the revised December estimate of $105.5 billion. Educational construction was at a seasonally adjusted annual rate of $80.9 billion, virtually unchanged from (±1.8%) the revised December estimate of $81.0 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,326.5 billion, 1.5% (±0.5%) above the revised December estimate of $1,307.1 billion.
- Residential construction was at a seasonally adjusted annual rate of $829.4 billion in January, 1.3% (±1.3%) above the revised December estimate of $819.0 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $497.2 billion in January, 1.8% (±0.5%) above the revised December estimate of $488.2 billion.
“Private nonresidential construction, especially for manufacturing plants, has rebounded sharply in recent months, while demand for housing remains strong,” said Ken Simonson, Associated General Contractors of America chief economist. “But public projects have yet to grow consistently.”
“The highway, transportation, and other infrastructure promised by [the infrastructure bill] is urgently needed to tackle snarled supply chains and rising costs,” said Stephen E. Sandherr, the association’s chief executive officer. “Congress and the administration need to fulfill the promise of the legislation right away.”
There are also some dark clouds on the horizon.
“Normally, one would look at headline numbers indicating that construction investment rose in America as a reason to cheer,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “But the construction spending data are not adjusted for inflation, and in real terms, construction spending was likely down for the month. Total construction spending is up more than 8% from last year, but materials prices are up approximately 24% over that span. Worker compensation costs have also been rising rapidly. As a result, contractor profit margin expectations have worsened in recent months, according to ABC’s Construction Confidence Index.
“Circumstances are worse in the nonresidential construction segment,” said Basu. “While construction spending is up 13% in the industry’s residential component, nonresidential spending is up less than 4% year-over-year. In certain categories, spending is down in both real and nominal terms. The fading of pandemic-related construction spending has produced a decline of 35% in the public safety segment. Financial impacts on the education sector stemming from the pandemic have resulted in a 7% decline in education-related construction spending. Spending in the beleaguered lodging segment is down nearly 25% in nominal terms.
“The Russian invasion of Ukraine will not help,” said Basu. “Oil and other key input prices are rising, placing further upward pressure on the cost of delivering construction services. Those elevated costs have already been leading some project owners to postpone projects in the hope of procuring more favorable bids in the future. Steel, copper, aluminum, neon and nickel prices are all implicated by the outbreak of war, and sanctions on Russia and limits on its exports will be in place long after hostilities end.”