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Construction spending grew in May: Report

July 6, 2018

Overall U.S construction spending hit a record $1.309 trillion in May as monthly increases in residential and public investment outweighed a decline in private nonresidential outlays, according to an analysis by the Associated General Contractors of America. Nevertheless, labor shortages and rising materials costs threaten future growth, the trade group predicts.

“Public construction spending has increased strongly for the past nine months and is now at the highest level since 2010, led by a rebound in infrastructure investment,” said Ken Simonson, the association’s chief economist, in a press release. “Single-family homebuilding is continuing to expand, while multifamily construction has pulled out of a recent slump, but growth in private nonresidential spending remains modest and inconsistent. However, rising materials costs and shortages of qualified workers may stall all types of projects.”

May's construction spending increased by 0.4 percent from April and by 4.5 percent from last May. Public construction spending in May rose by 0.7 percent and private residential spending by 0.8 percent, while private nonresidential construction spending declined by 0.3 percent. Year on year, public construction spending climbed by 4.7 percent, private residential spending by 6.6 percent and private nonresidential construction by 1.8 percent.

“Year on year, private nonresidential construction spending edged up by 1.8 percent”

Among public infrastructure spending categories, highway and street construction increased by 5.8 percent from May 2017 to May 2018; transportation construction (airports, transit, public rail and ports) rose by 9.1 percent; sewage-and-waste-disposal construction by 5.6 percent; water supply by 9.4 percent; and conservation and development by 8.5 percent. The largest public building construction type educational construction — inched up by 0.4 percent.

Spending on single-family homebuilding increased by 8.2 percent from May 2017 to May 2018, while multifamily construction spending climbed by 4.2 percent, Simonson notes. Private nonresidential spending showed a mixed pattern: The largest category — power construction spending (including oil and gas field and pipeline structures) — declined by 0.7 percent over the 12 months, but the next-largest segment — commercial construction (retail, warehouse and farm buildings) — saw a gain of 2 percent. Manufacturing construction spending fell by 11 percent year on year, but private office construction jumped by 9.7 percent.

Rapidly rising materials costs, attributable in part to new tariffs, are likely to make some projects unaffordable, says Stephen E. Sandherr, CEO of the Associated General Contractors of America. “Contractors are struggling to be successful in an environment where there aren’t enough workers available to install increasingly expensive construction materials,” Sandherr said. “Establishing more construction training programs and finding a more effective way to boost domestic steel and aluminum production will help this industry and the economy to continue expanding.”

By Brannon Boswell

Executive Editor/SCT

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