AGC: Data shows construction spending down slightly

Total construction spending declined 0.7 percent in August as spending on new houses declined sharply and public and private nonresidential construction posted mixed results, according to an analysis of federal spending data done by the Associated General Contractors of America (AGC).

Association officials say rising interest rates hurt demand for housing and many private-sector projects, while the impacts of new federal funding for infrastructure, semiconductor plants and green energy facilities have yet to fully kick in.

“The construction market is in a transition that is likely to accelerate in the months ahead,” says Ken Simonson, AGC’s chief economist. “Steeply rising interest rates have crushed demand for single-family housing and threaten developer-financed projects, while newly enacted federal legislation will soon boost investment in power, manufacturing and infrastructure construction. But a pickup in these segments will require improvements in the timely approval of projects and adequate supplies of workers and materials.”

AGC says construction spending, not adjusted for inflation, totaled $1.78 trillion at a seasonally adjusted annual rate in August – 0.7 percent below the upwardly revised July rate. Spending on new single-family homes declined for the fourth straight month, falling by 2.9 percent from July. Spending on other residential segments rose, increasing 0.4 percent for multifamily construction and 1 percent for improvements to owner-occupied housing.

Private nonresidential spending edged down 0.1 percent for the month. The largest nonresidential segment – power, comprising electric, oil and gas projects – slipped 0.9 percent in August. Spending on commercial construction – warehousing, retail and farm projects – was flat in the month, AGC says.

Manufacturing construction declined 0.5 percent last month but jumped 21.6 percent versus August 2021. Spending on office construction, which includes data centers, climbed 0.3 percent for the month.

Public construction spending decreased 0.8 percent in August, AGC says, with declines for the three largest segments. Highway and street construction spending fell 1.4 percent while educational and transportation construction spending each decreased 0.4 percent.

AGC officials say the benefits of new federal investments in the construction of infrastructure, manufacturing and energy production have been delayed by some of the regulatory requirements associated with the measures. They caution that workforce shortages and ongoing supply chain problems could undermine the sector’s ability to deliver federally funded projects and help rebuild in parts of the Southeast after Hurricane Ian.

“Federal officials can shore up slowing demand for construction by moving more quickly to fund new projects,” says Stephen Sandherr, AGC’s CEO. “Meanwhile, boosting investments in construction training and education programs will help ensure there are enough workers to rebuild after natural disasters and modernize our infrastructure and energy and manufacturing sectors.”