Construction spending declined 0.8% month over month in October but topped year-ago levels by 1.1% as decreases in private nonresidential, multifamily and public projects outweighed a revival in single-family homebuilding, according to a recent analysis of new federal spending data by the Associated General Contractors of America (AGC).
Association officials said the impact of trade conflicts is harming private construction.
“A drop in mortgage interest rates has given a boost to single-family homebuilding in recent months, but these gains have been offset by weak private nonresidential spending as trade friction drags down US economic growth,” said Ken Simonson, AGC’s chief economist. “Businesses that have been hurt by existing tariffs and retaliatory actions by US trading partners or firms facing uncertainty over future trade policy are likely to hold off on construction projects.”
Construction spending totaled $1.291 trillion at a seasonally adjusted annual rate in October, a decrease of 0.8% from the September rate but 1.1% more than the October 2018 rate, according to recent estimates released by the US Census Bureau. Year-to-date spending for January-October combined fell 1.7% from the same months in 2018.
Private residential construction spending declined 0.9% for the month but edged up 0.5% from a year ago. Single-family homebuilding rose for the fourth consecutive month, rising 1.6% from September, although the October rate was 3.1% less than in October 2018. Spending on multifamily projects was down 1.6% for the month and down 2.1% from a year earlier. Spending on residential improvements fell 4.5% for the month but increased 8.2% over 12 months.
Private nonresidential spending decreased 1.2% from September to October and 4.3% from a year ago, AGC said. Major private nonresidential segments experienced mixed year-over-year results. The largest—power construction (comprising electric power generation, transmission and distribution, plus oil and gas fields and pipelines)—climbed 3.6% from a year ago. Commercial (retail, warehouse and farm) construction tumbled 17.7%. Manufacturing construction inched down 0.2% gain. Private office construction spending rose 1%.
Public construction spending dipped 0.2% for the month but jumped 10.2% from a year earlier. Among the three largest public categories, spending in October climbed 8.4% compared to the October 2018 rate for highway and street construction spending, 9.8% for educational construction and 13% for transportation (airports, transit, rail and port) projects.
Association officials observed that private nonresidential investment weakened over the past year as trade disputes and uncertainty over future trade policy have had a negative impact on a variety of agricultural, manufacturing, distribution and transportation businesses. They urged the Trump administration to settle disputes promptly.
“Construction firms are at risk of being caught in the crossfire from trade wars unless the government removes tariffs that are hurting the competitiveness of US businesses and gets foreign countries to re-open their markets to US exports,” said Stephen E Sandherr, AGC’s chief executive officer. “Until that happens, private nonresidential construction is likely to suffer.”