Construction spending in May declined for a third month as projects were delayed due to economic uncertainty. Construction spending fell 2.1 percent to a seasonally adjusted annual rate of $1.36 trillion, the lowest total since June 2019, said the Associated General Contractors of America in an analysis of new government data.
Private construction spending dipped another 3.3 percent in May after dropping 3.8 percent in April. Public spending rose 1.2 percent, but only partially offset a drop of 2.7 percent the previous month.
May construction benefited from emergency healthcare projects, highway construction taking advantage of reduced traffic and easing of shutdown orders, said AGC Chief Economist Ken Simonson.
“Unfortunately, these stimuli have now worn off and there is a high risk that construction spending will soon shrink as state and local governments start a new fiscal year today with large budget gaps that they must close. Too often, they turn to postponing and canceling construction.”
Simonson said highway and other public construction spending will likely fade as current projects are completed. Private-sector construction spending is likely to stay below pre-COVID-19 levels as owners delay investment due to pandemic-induced uncertainty. Public construction will be impacted by falling tax revenue at the state and local level.
“The best way to get people back to work and to make our economy more efficient and effective for the long run is by improving the nation’s vital infrastructure,” said the association’s CEO Stephen Sandherr. “Leaders in both parties need to understand that messaging measures may excite the base, but they do nothing to improve roads, fix bridges or modernize water systems.”
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