Construction spending dipped 0.8 percent in February hampered by unseasonable weather and fewer new projects, said the Associated General Contractors of America in an analysis of new government data. Contractors reported rising costs and longer delivery times that threaten project completion and financial health.
Construction spending totaled $1.52 trillion at a seasonally adjusted annual rate in February. Compared to a year ago, spending was 5.3% higher but almost completely due to residential construction, said AGC Chief Economist Ken Simonson. Residential construction spending slipped 0.2% from January but was up 21% from February 2020. Combined private and public nonresidential spending declined 1.3% from January and 6.1% over 12 months.
“The downturn in February reflects both an unfavorable change from mild January weather and an ongoing decline in new nonresidential projects,” said Ken Simonson, the association’s chief economist. “Unfortunately, it will take more than mild weather to help nonresidential contractors overcome the multiple challenges of falling demand for many project types, steeply rising costs, and lengthening or uncertain delivery times for key materials.”
Rising materials prices and unreliable delivery schedules are making it hard for firms to remain profitable as they have difficulty passing raising prices for construction work, said AGC. The newly proposed infrastructure package will help boost demand for many types of construction projects, said officials, but the AGC also urges Washington to address supply-chain challenges, including ending tariffs on key materials like lumber and steel.
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