Steel Markets

AGC: Construction Spending Rebounds in October

Written by David Schollaert

Total construction spending edged higher in October, as gains in public and private project types outmatched decreases in single- and multifamily residential outlays, reported the Associated General Contractors of America (AGC).

Public sector investments would likely rise in the near future as a result of the recently-passed infrastructure bill, according to the AGC, but they cautioned that labor shortages and supply-chain problems were posing significant challenges for the industry.

“It is encouraging to see such a broad-based pickup in spending on nonresidential projects in the latest month,” said Ken Simonson, AGC’s chief economist. “But the construction industry still faces major challenges from workforce shortages and supply-chain bottlenecks.”

Construction spending in October totaled $1.60 trillion at a seasonally adjusted annual rate, 0.2% above the September rate and 8.6% higher than last October. Year-to-date spending through October was 7.5% higher than the same 2020 period.

Among the 16 nonresidential project types the Census Bureau reports on, all but two posted spending increases from September to October. Total public construction spending rose 1.8% for the month, while private nonresidential spending inched up 0.2%. However, for the first 10 months of 2021 combined, nonresidential spending trailed the same year-ago period by 4.7%, with mixed results by type.

Combined private and public spending on electric power and oil and gas projects – the largest nonresidential segment – declined 0.6% for the month and lagged the 2020 year-to-date total by 1.7%. Every other large category saw an increase in October.

Highway and street construction spending increased 2.4% for the month, though the year-to-date total lagged the same 2020 period by 0.8%. Education construction rose 0.2% in October, but trailed the 2020 year-to-date total by 9.2%. Commercial construction – comprising warehouse, retail, and farm structures – was nearly unchanged from September to October, but was 1.9% higher for the first 10 months combined than in January-October 2020.

Residential construction spending declined for the second month in a row, slipping 0.5% month on month. Nevertheless, the year-to-date total for residential spending was 24.2% higher than in the same months of 2020. Spending on new single-family houses decreased 0.8% for the month, but outpaced the 2020 year-to-date total by 25.9%. Multifamily construction spending dipped 0.1% in October, but topped the 2020 year-to-date total by 16.6%.

Spending on many categories of public construction is likely to increase soon as the investments from the bipartisan infrastructure bill begin to flow, said the AGC. They cautioned, however, that the supply-chain challenges and labor shortages were impacting construction schedules and budgets and prompting some owners to delay or cancel projects.

AGC again urged the Biden administration to explore new ways to relieve shipping delays and to invest more in career and technical education programs that serve as a pipeline into construction careers.

“Getting a handle on supply chains and encouraging more people to work in construction will go a long way in helping this industry recover,” said Stephen Sandherr, AGC’s CEO.

David Schollaert

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