The U.S. Census Bureau announced that construction spending during May 2022 was estimated at a seasonally adjusted annual rate of $1,779.8 billion, 0.1% (±0.8%) below the revised April estimate of $1,782.5 billion. The May figure is 9.7% (±1.3%) above the May 2021 estimate of $1,621.9 billion.
Highway construction was down 2.3% from May.
During the first five months of this year, construction spending amounted to $686.9 billion, 11.0% (±1.0%) above the $619.0 billion for the same period in 2021.
Spending on private construction was at a seasonally adjusted annual rate of $1,436.0 billion, virtually unchanged (±0.7%) from the revised April estimate of $1,435.9 billion. Residential construction was at a seasonally adjusted annual rate of $938.2 billion in May, 0.2% (±1.3%) above the revised April estimate of $935.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $497.8 billion in May, 0.4% (±0.7%) below the revised April estimate of $499.9 billion.
In May, the estimated seasonally adjusted annual rate of public construction spending was $343.8 billion, 0.8% (±1.6%) below the revised April estimate of $346.6 billion. Educational construction was at a seasonally adjusted annual rate of $78.4 billion, 0.4% (±3.0%) below the revised April estimate of $78.7 billion.
Highway construction was at a seasonally adjusted annual rate of $98.1 billion, 2.3% (±4.6%) below the revised April estimate of $100.4 billion.
“Contractors say demand remains strong for nonresidential projects but they are having trouble both getting materials on time and hiring enough workers,” said Ken Simonson, Associated General Contractors of America chief economist. “The industry’s unemployment rate was down to 3.8% in May, a sign of how scarce experienced workers are.”
“Contractors have the work, but they don’t have enough workers or materials to keep pace with strong demand for construction in many parts of the country,” said Stephen E. Sandherr, the association’s chief executive officer. “Exposing more people to the opportunities and benefits of working in construction and fixing the supply chain will boost construction activity and employment in much of the country.”
“Many contractors continue to report that they are operating at capacity despite a lack of strong nonresidential construction spending recovery,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “That juxtaposition provides solid evidence that the supply side of the U.S. economy remains heavily constrained by worker shortages, domestic and global supply chain disruptions, and resulting high prices.
“Since the early months of the pandemic, contractors have reported that they are able to pass along their cost increases to project owners, according to ABC’s Construction Confidence Index,” said Basu. “But there are growing concerns among industry leaders that the ability to pass along cost increases will dissipate during the months ahead as financial conditions tighten and confidence in economic performance wanes.
“A primary implication is that contractor margins may be squeezed going forward, and there is growing anecdotal evidence that this is already occurring,” said Basu. “There is also a growing risk of a significant number of project postponements in both private and public construction segments due to high materials prices and labor costs.
“The key to sustaining nonresidential construction’s recovery will be slower inflation,” said Basu. “As long as inflation remains elevated, monetary policy will continue to tighten and project owners will be less willing to move forward with projects in an effort to preserve cash. Unfortunately, ongoing efforts to limit inflation are likely to result in recession or at least further economic slowing, which will create additional issues for many contractors. However, less inflation and more favorable construction materials prices would create a foundation for renewed construction spending vigor.”