AGC: Construction spending back up in October

Total construction spending grew in October, according to an analysis of federal construction spending data done by the Associated General Contractors of America (AGC).

Gains in public and private project types outmatched the decreases in single- and multifamily residential outlays, AGC says.

AGC officials note that public sector investments would likely rise in the near future due to the recently passed Infrastructure Investment & Jobs Act (IIJA), but they caution that labor shortages and supply chain problems are 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,” says 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 $1.6 trillion at a seasonally adjusted rate. That amount is 0.2 percent above September’s rate and 8.6 percent higher than October 2020. Year-to-date spending for the first 10 months of 2021 combined increased 7.5 percent from the total for January 2020 to October 2020.

Among the 16 nonresidential projects types the Census Bureau reported on, all but two saw spending increases from September to October. Total public construction spending rose 1.8 percent for the month while private nonresidential spending increased 0.2 percent.

For the first 10 months of 2021 combined, however, nonresidential spending trailed the same 2020 timeframe by 4.7 percent, 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 percent for the month and was 1.7 percent behind the 2020 year-to-date total.

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

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