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AGC: Construction spending dips with homebuilding

March 15, 2023
Association calls on Washington to issue guidance on ‘Buy America’ rules for construction materials, energy projects eligible for tax credits

Total construction spending decreased by 0.1% in January, as declines in single-family homebuilding and public construction offset marginal gains from private nonresidential construction, according to a recent analysis of federal data by the Associated General Contractors of America. Association officials said a lack of clear guidance from officials in Washington is delaying expenditures on much-needed infrastructure and energy projects.

“Laws enacted more than six months ago created unprecedented funding and tax credits for a wide range of transportation, environmental, energy, and manufacturing projects,” said Ken Simonson, the association’s chief economist.

“But few contractors have actually won contracts yet.”

Construction spending, not adjusted for inflation, totaled $1.826 trillion at a seasonally adjusted annual rate in January, 0.1% below the December rate, which was revised up from the initial estimate a month ago. Spending on private residential construction decreased for the eighth consecutive month in January, by 0.6%. Spending on private nonresidential construction increased 0.9% in January, while public construction investment declined 0.6%.

Spending varied among large nonresidential segments. The biggest component, manufacturing plants, increased 5.9%. Commercial construction—comprising warehouse, retail, and farm construction—decreased 3.1% in January. Highway and street construction decreased 1.0%. Spending on power construction rose 0.9%.

Among other categories that are expected to receive funding or tax credits under federal legislation, investment in transportation facilities rose 1.7%. Outlays for sewage and waste disposal construction declined 2.5%, while spending on water treatment infrastructure decreased 5.9%.

Residential spending shrank due to a 1.7% contraction from December in single-family homebuilding. That outweighed increases of 0.4% in multifamily construction and 0.3% in additions and renovations to owner-occupied houses.

Association officials expressed frustration that a lack of guidance on projects eligible for tax credits and incomplete or contradictory information about “Buy America” requirements have held up billions of dollars in project awards. They urged the Biden administration to finalize rules for awarding projects under the Infrastructure Investment and Jobs Act, which became law in 2021, and the Inflation Reduction Act, which was enacted in August of 2022.

“Contractors, developers, and state agencies have been hamstrung by the lack of clear or realistic guidance implementing under these laws,” said Stephen E. Sandherr, the association’s CEO. “It is high time to put in place the rules that will enable these vitally needed projects to be built.”

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