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Nonresidential construction outlays drop for fourth straight month

By |  May 3, 2021

AGCA

Nonresidential construction spending fell to a two-year low in March, the Associated General Contractors of America (AGC) reports.

Spending reached a two-year low as contractors struggled with slumping demand for most project types and growing shortages of materials, transport and workers. AGC officials say project cancellations and widespread supply chain problems are hindering the industry’s recovery.

“Every major category of private nonresidential projects has declined over the past year, while public construction spending is also deteriorating rapidly,” says Ken Simonson, the chief economist at AGC, which conducted an analysis of new federal construction spending data. “Unfortunately, the widespread and growing backlogs for key materials and shortages of trucking and rail services to deliver goods mean that even projects that are underway are likely to take longer to complete.”

Spending details

Construction spending in March totaled $1.51 trillion at a seasonally adjusted annual rate, an increase of 0.8 percent from the pace in February and 5.3 percent higher than in March 2020.

Still, the year-over-year gain was limited to residential construction, Simonson says. That segment jumped 1.7 percent for the month and 23 percent year over year.

Meanwhile, combined private and public nonresidential spending declined 1.1 percent from February – the fourth consecutive monthly decrease – and 7.4 percent over 12 months.

Private nonresidential construction spending fell 0.9 percent from February to March and 9.1 percent since March 2020, with year-over-year decreases in all 11 subsegments. The largest private nonresidential category – power construction – retreated 8.3 percent year over year and 0.4 percent from February to March.

Among the other large private nonresidential project types, commercial construction –comprising retail, warehouse and farm structures – slumped 8.8 percent year over year and 0.5 percent for the month. Manufacturing construction tumbled 7.8 percent from a year earlier and 1.3 percent in March. Office construction decreased 4.2 percent year over year and 0.4 percent in March.

Public construction spending slumped 4.6 percent year over year and 1.5 percent for the month. Among the largest segments, highway and street construction declined 10.9 percent from a year earlier and 2.2 percent for the month. Educational construction decreased 4 percent year over year and 2 percent in March. Spending on transportation facilities declined 0.9 percent over 12 months but rose 1.8 percent in March.

AGC officials urge Congress and the Biden administration to work together to increase investments in infrastructure. They continue to call on President Biden to take steps to address rapidly rising materials prices, including ending tariffs on key construction materials such as steel and lumber.

AGC officials also caution that the industry will have a hard time recovering without new investments and supply chain relief.

“Federal officials are pushing for an economic recovery while at the same time hanging on to dated policies, like tariffs, that are holding growth back,” says Stephen Sandherr, AGC’s CEO. “Boosting infrastructure investments and tackling supply chain problems will go a long way in unleashing demand for new construction workers.”

Kevin Yanik

About the Author:

Kevin Yanik is the editor-in-chief of Pit & Quarry magazine. Yanik can be reached at 216-706-3724 or kyanik@northcoastmedia.net.

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