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Construction Spending Needs Boost from Infrastructure Bill Says AGC

August 1, 2017

Construction spending is suffering from a decrease in public investment said Ken Simonson, chief economist at the Associated General Contractors of America.

“Construction spending is still increasing overall but growth has become much more uneven across categories in recent months,” said Simonson. “There has been a steep decline in public investment in nearly all types of construction over the past year. Private nonresidential construction is still rising overall but generally at slower rates than was occurring a few months ago.”

AGC urges Congress and the Trump administration to provide funding to upgrade aging infrastructure. Investment in public works projects, said the association, would help offset slackening demand for construction.

“Washington officials need to act quickly to rebuild our public works before bad roads, unclean water and unreliable power systems begin to serve as a drag on broader economic growth,” said AGC Chief Executive Officer Stephen E. Sandherr.

AGC Analysis of Construction Spending

Construction spending in June declined from May but increased from a year ago as public investment shrank for nearly every type of structure, according to an analysis of new government data by the Associated General Contractors of America. Association officials cautioned that the significant declines in public-sector construction spending come at a time when much of the nation’s public infrastructure is deteriorating due to age or overuse.

Construction spending in June totaled $1.206 trillion at a seasonally adjusted annual rate, a drop of 1.3 percent from the downwardly revised May total and up just 1.6 percent from a year earlier, Simonson said. He noted that every public spending category recorded a decrease for the month and nearly all were lower than a year ago, while multifamily construction and several private nonresidential categories also declined or had smaller increases than previously.

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Public construction spending plunged 5.4 percent from the prior month and 9.5 percent from June 2016 to June 2017. The spending rate in June was the lowest seasonally adjusted rate since February 2014. The biggest public segment—highway and street construction—slumped 8.1 percent from a year earlier. Among other major public infrastructure categories, spending on transportation facilities such as transit and airport construction dropped 3.9 percent year-over-year; spending on sewage and waste disposal plummeted 16.1 percent; and spending on water supply fell 17.7 percent. Public spending on educational structures declined 7.3 percent from a year ago.

Private nonresidential spending inched up 0.1 percent for the month and 1.1 percent over 12 months. The largest private nonresidential segment was power construction (including oil and gas field and pipeline projects), which dropped 5.4 percent from June 2016 to June 2017. The next-largest segment, commercial (retail, warehouse and farm) construction, climbed 13.8 percent year-over-year. Manufacturing construction declined 7.7 percent for the year. Private office construction increased 12.6 percent since June 2016.

Private residential construction spending slipped by 0.2 percent between May and June 2017 but gained 9.2 percent over the year. Spending on multifamily residential construction edged up 0.6 percent from a year ago, while single-family was up 9.0 percent from the June 2016 rate.