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AGC: Construction spending mixed in May

July 12, 2023
Infrastructure categories lag, manufacturing projects and homebuilding surge as association urges federal officals to issue ‘timely, clear, and consistent regulations’ that facilitate spending

Total construction spending in May increased by 0.9% from April and 2.4% year-over-year as gains in manufacturing construction and single-family homebuilding offset a downturn in major infrastructure segments, according to a recent analysis of new federal data by the Associated General Contractors of America.

Association officials cautioned that unclear and contradictory government regulations were slowing a variety of publicly funded projects and they urged the Biden administration to speed the awarding of contracts.

“The data for May show there has been no letup in the feverish pace of manufacturing construction but a very mixed picture for other project types,” Ken Simonson, the association’s chief economist, said in a news release. “There have been strong year-over-year increases in most categories, but it remains to be seen if the market is now cooling.”

Construction spending, not adjusted for inflation, totaled $1.925 trillion at a seasonally adjusted annual rate in May. Monthly and year-over-year changes varied among major segments. Spending on private nonresidential construction slipped 0.3% from April but jumped 20.5% from a year earlier. Spending on public nonresidential construction inched up 0.1% in May and 12.3% over 12 months. Private residential spending surged 2.2% for the month but remained 11.6% below the May 2022 level.

Two types of private nonresidential spending increased significantly in May, while most other categories lagged. Manufacturing construction jumped 1.0% for the month and 76.9% year-over-year. Office construction, which includes data centers, rose 0.7% and 6.7%, respectively. But monthly spending slumped 1.8% for commercial construction—comprising warehouse, retail, and farm projects—and 0.8% for private power construction. Private health care construction tumbled 2.1% for the month.

Public construction spending was mixed, as the largest infrastructure categories declined for the month and education spending was flat. Highway and street construction declined 0.4% from April and public spending on transportation facilities, such as airports, transit, and passenger rail, slid 0.8%. There were monthly increases of 1.1% in spending on sewage and waste disposal and 2.6% on water supply but a drop of 3.8% in conservation and development, such as river and harbor projects.

The pickup in private residential spending was led by a 1.7% increase in single-family homebuilding—the first gain since April 2022. Multifamily construction dipped by less than 0.1%, its first decline since July 2022.

Association officials urged the Biden administration to clarify the rules applying to U.S.-made construction materials, apprenticeship programs, and tax credits to fund promised energy projects. They warned that lack of clarity was keeping contractors from bidding on projects or proceeding on ones that had been awarded.

“Contractors are eager to build the infrastructure Congress has approved,” said Stephen E. Sandherr, the association’s CEO. “It’s up to federal officials to make sure these projects can get built by issuing timely and clear rules that are consistent with Congressional intent.”

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