The U.S. Census Bureau reported that construction spending during February 2022 was estimated at a seasonally adjusted annual rate of $1,704.4 billion, 0.5% (±0.7%) above the revised January estimate of $1,695.5 billion. The February figure is 11.2% (±1.2%) above the February 2021 estimate of $1,533.3 billion.
During the first two months of this year, construction spending amounted to $237.8 billion, 10.4% (±1.0%) above the $215.4 billion for the same period in 2021.
In February, the estimated seasonally adjusted annual rate of public construction spending was $350.7 billion, 0.4% (±1.3%) below the revised January estimate of $352.2 billion. Highway construction was at a seasonally adjusted annual rate of $104.4 billion, 1.3% (±4.8%) below the revised January estimate of $105.8 billion.
Educational construction was at a seasonally adjusted annual rate of $80.6 billion, 1.3% (±1.8%) below the revised January estimate of $81.7 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,353.7 billion, 0.8% (±0.7%) above the revised January estimate of $1,343.4 billion.
- Residential construction was at a seasonally adjusted annual rate of $850.6 billion in February, 1.1% (±1.3%) above the revised January estimate of $841.2 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $503.0 billion in February, 0.2% (±0.7%) above the revised January estimate of $502.2 billion.
“Construction is contributing significantly to the expansion of employment and the overall economy,” said Ken Simonson, Associated General Contractors of America chief economist. “But the sector is facing growing challenges in terms of filling job openings, obtaining materials, and keeping up with soaring wages and prices.”
“Nonresidential spending decreased in February despite inflationary pressures that should have driven it higher,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “True, nonresidential spending is up 6.2% year over year, but given the significance of construction materials inflation, spending has almost certainly declined in real terms.
“Moreover, the Russia-Ukraine war has spawned further materials price increases, which in turn raises the risk that project owners will decide to postpone or cancel projects,” said Basu. “ABC’s Construction Confidence Index indicates that a growing number of contractors expect to trim their margins during the year ahead in order to induce purchasers to continue to move forward. The spread of an omicron subvariant in China has started to interfere with production there, which translates to additional supply chain disruptions.
“As if that were not enough, the risk of recession is rising,” said Basu. “While there is evidence of ongoing momentum, a recent increase in interest rates coupled with hawkish statements from the Federal Reserve imply that credit conditions will become more challenging this year. The question is whether the Federal Reserve can slow economic growth in order to counter inflation without driving the economy into recession.
“The recent inversion of the yield curve is viewed by many economists as a leading indicator of recession,” said Basu. “Since the early 1980s, most rate tightening cycles have ended in recession. For contractors that largely work on private construction projects, this suggests risk of weakening backlog at some point later this year or in 2023. For those largely focused on public work, the economics are more favorable, since federal infrastructure outlays will be elevated for approximately the next five years.”