Total construction spending dipped from February to March, with decreases in private nonresidential and residential projects offsetting a rebound in the public construction sector, according to a recent analysis of a new government report by the Associated General Contractors of America.
Association officials noted, however, that contractors continue to report “robust” backlogs and few cancellations, suggesting the slowdown in spending may be due to a lack of workers instead of slumping demand.
“Private nonresidential categories showed varied patterns, while multifamily construction continued to slip from record levels in 2023,” Ken Simonson, the association’s chief economist, said in a news release. “Meanwhile, public construction posted healthy gains for the month and year-over-year.
“These diverse trends suggest there is still strong demand for projects, but a dearth of workers may be forcing a slowdown in spending.”
Construction spending, not adjusted for inflation, totaled $2.084 trillion at a seasonally adjusted annual rate in March, ACG reported. That figure is 0.2% below the downwardly revised February rate, but 9.6% above the March 2023 level.
Spending on private nonresidential and residential projects both declined in March but rose year-over-year. Nonresidential construction slipped 0.2% for the month but rose 11.1% from March 2023. The largest private segment, manufacturing construction, climbed 0.1% and 25.8%, respectively. Commercial construction fell 0.6% in March but ticked up 1.3% over 12 months. Investment in power, oil, and gas projects slumped 0.9% in March but rose 6.0% year-over-year. Spending on private residential construction fell 0.7% for the month but grew 4.4% year-over-year. Single-family construction fell 0.2% after 10 monthly gains in a row but rose 18.3% year-over-year. Multifamily spending fell 0.6% in March but climbed 3.5% from March 2023.
Public construction spending increased 0.8% for the month and 17.9% from a year earlier. The largest public segment, highway and street construction, climbed by 0.9% in March and 19.9% over 12 months.
Public educational spending rose 1.0% and 16.7%, respectively.
Association officials said the strong gains in public construction were good for the industry and the economy, but they also noted that worker shortages are likely making for longer project completion times and holding down monthly spending on private projects. They urged federal, state, and local officials to hike funding for construction education and training programs to enable more people to acquire skills needed for construction careers. And they continued to push federal officials for measures to allow more people to lawfully enter the country and work in construction.
“Continuing economic growth requires investments in infrastructure, manufacturing, and energy projects,” said Jeffrey D. Shoaf, the association’s CEO. “Investing in new construction education and training programs and enacting some common-sense immigration reforms is essential for ensuring the nation has enough workers with the skills to build these and other vitally needed projects.”