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Construction spending up overall, down for infrastructure projects

Oct. 4, 2017

Most major construction spending categories increased from July to August but activity was mixed compared to spending levels a year earlier, according to an analysis of new government data by the Associated General Contractors of America. Association officials noted that big drops in public investments mean infrastructure will continue to deteriorate and impede economic growth.

"It is encouraging that spending rebounded in August for many types of residential, private nonresidential, and public projects," said Ken Simonson, the association's chief economist. "However, the August numbers also show that public and private nonresidential construction continues to slow or fall below last year's levels. Spending patterns are likely to be uneven through next year, as previously hot categories cool off but others revive."

Construction spending in August totaled $1.218 trillion at a seasonally adjusted annual rate, an increase of 0.5% from the July total and up 2.5% from a year earlier, Simonson said. He noted that all major categories had gains for the month but private nonresidential and public construction totals were lower than a year ago, while single- and multifamily construction both rose on a year-over-year basis.

Private nonresidential spending grew 0.5% in August, after two months of steep declines, but was 2.5% below the August 2016 level. The largest private nonresidential segment was power construction (including oil and gas field and pipeline projects), which gained 0.5% for the month but dropped 7.4% from August 2016 to August 2017. The next-largest segment, commercial (retail, warehouse and farm) construction, rose 0.1% for the month and 10.4% year-over-year. In contrast, manufacturing construction plunged 4.3% for the month and 20.8% from a year earlier. Private office construction increased 1.3% from July but only 0.2% since August 2016.

Public construction spending climbed 0.7% from the prior month following large decreases in June and July. But public spending skidded 5.1% from August 2016 to August 2017. Highway and street construction declined 1.3% for the month and 6.0% from a year earlier. Among other major public infrastructure categories, spending on transportation facilities such as transit and airport construction rose 0.8% for the month but slipped 0.4% year-over-year; spending on sewage and waste disposal plummeted 1.2% and 16.1%, respectively; and spending on water supply rose 2.6% in August but fell 6.4% year-over-year. Public educational construction was up 3.5% in August but down 2.8% over 12 months.

Private residential construction spending increased 0.4% between July and August and 11.6% over the year. Spending on multifamily residential construction grew 0.9% in August and 2.3% from a year ago, while single-family was up 0.3% for the month and 11.1% from the August 2016 rate.

Association officials said that efforts to reform the tax code provide a good opportunity to increase public and private funding for aging and overused public infrastructure. New investments will offset declining public sector demand and help boost overall economic activity, they added.

"It is hard for American employers to be globally competitive when their workers are stuck in traffic and their products are being detoured around crumbling bridges," said Stephen E Sandherr, the association's chief executive officer.