PRESS RELEASES
WASHINGTON DC, March 1 — Construction spending increased in January compared to both December and a year ago, with strong gains in private nonresidential and residential construction but mixed results for public spending, according to new data released by the U.S. Census Bureau. Both Associated General Contractors of America (AGC) and Associated Builders and Contractors (ABC) released their respective analyses of the report.
“Private nonresidential construction, especially for manufacturing plants, has rebounded sharply in recent months, while demand for housing remains strong,” said AGC Chief Economist Ken Simonson. “But public projects have yet to grow consistently.”
Overall, construction spending in January totaled $1.68 trillion at a seasonally adjusted annual rate, 1.3% above the upwardly revised December rate and 8.2% higher than in January 2021. Private residential construction spending rose 1.3% in January from a month prior and 13.4% from January 2021, while private nonresidential construction spending increased 1.8% from December to January and 7.3% from January 2021. In contrast, public construction spending rose 0.6% for the month but slipped 1.3% from the year-ago level.
On a seasonally adjusted annualized basis, nonresidential spending totaled $838.9 billion for the month. Spending was up on a monthly basis in nine of the 16 nonresidential subcategories.
In particular, a surge in manufacturing construction, which gained 8.5% for the month and 31.2% year-over-year, accounted for the bulk of the private nonresidential pickup. In addition, the largest private nonresidential segment, power construction, rose 2.7% for the month, but trailed the January 2021 rate by 1.4%. The next-largest segment, commercial construction, declined 0.5 percent in January but jumped 18% year-over-year, with year-over-year gains in each component: warehouses (up 22.4%), retail categories (up 15.2%), and farm (up 4.4%).
“Normally, one would look at headline numbers indicating that construction investment rose in America as a reason to cheer,” said ABC Chief Economist Anirban Basu. “But the construction spending data are not adjusted for inflation, and in real terms, construction spending was likely down for the month. Total construction spending is up more than 8% from last year, but materials prices are up approximately 24% over that span. Worker compensation costs have also been rising rapidly. As a result, contractor profit margin expectations have worsened in recent months, according to ABC’s Construction Confidence Index."
“Circumstances are worse in the nonresidential construction segment,” added Basu. “While construction spending is up 13% in the industry’s residential component, nonresidential spending is up less than 4% year-over-year. In certain categories, spending is down in both real and nominal terms."
The fading of pandemic-related construction spending has produced a decline of 35% in the public safety segment, he noted. Financial impacts on the education sector stemming from the pandemic have resulted in a 7% decline in education-related construction spending.
And “the Russian invasion of Ukraine will not help,” said Basu. “Oil and other key input prices are rising, placing further upward pressure on the cost of delivering construction services. Those elevated costs have already been leading some project owners to postpone projects in the hope of procuring more favorable bids in the future. Steel, copper, aluminum, neon and nickel prices are all implicated by the outbreak of war, and sanctions on Russia and limits on its exports will be in place long after hostilities end.”
Domestically, AGC noted that Congress has yet to fund promised increases in federal spending that were outlined in the Bipartisan Infrastructure Act, which was signed into law in November.
“The highway, transportation, and other infrastructure promised by that bill is urgently needed to tackle snarled supply chains and rising costs,” said Stephen E. Sandherr, AGC’s chief executive officer. “Congress and the administration need to fulfill the promise of the legislation right away.”
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