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AGC: Construction Spending Dips in June, But Strong in First Half

Written by Sandy Williams

June construction spending declined 1.1 percent after an upwardly revised record level in May, according to government data analyzed by the Associated General Contractors of America. However, the first half of 2018 was marked by widespread gains in public and private investment spurred by recent tax and regulatory reform.

“There appears to be plenty of demand for construction despite the drop in spending reported for June,” said Ken Simonson, the association’s chief economist. “The estimate for May, which was already a record high, was revised sharply upward, as were numbers for April. These revisions show that the June total may be higher than initially reported and that it is wiser to focus on longer-term trends, such as the year-to-date totals for the first half of 2018 compared with the same period in 2017. Those numbers show a healthy increase in spending.”

Spending in the first six months of 2018 was 5.1 percent higher than the same period a year ago. Public construction spending climbed 4.7 percent, private residential spending 8.3 percent and private nonresidential construction spending edged up 1.8 percent, reported AGC.

Compared to May, June public construction spending dipped 3.5 percent, private residential spending decreased 0.5 percent, and private nonresidential construction spending slipped 0.3 percent.

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The largest private category, single-family homebuilding, increased 9.0 percent year-to-date, while multifamily construction spending dipped 0.7 percent, Simonson noted. The largest private nonresidential category—power construction spending (including oil and gas field and pipeline structures)—declined 0.8 percent year-to-date, but the next largest segment—commercial construction (comprising retail, warehouse and farm buildings)—had a gain of 4.8 percent. Private office construction spending grew by 5.6 percent year-to-date, while manufacturing construction spending shrank 8.5 percent.

“Tax and regulatory reform are helping stimulate new demand for construction projects,” said AGC CEO Stephen Sandherr. “But if contractors are forced to raise prices significantly to cope with rising labor and materials costs, many public and private sector clients may scale back investments in new construction projects.”

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