AGC urges public-sector investment as construction spending slows
Construction spending held steady in August compared to July but is up nearly 5% for the first eight months of the year compared to the same period in 2015, according to the Associated General Contractors of America. Association officials said the new spending figures indicate that the industry's recovery may be at risk and said new investments in the nation's aging water systems and other infrastructure could help offset declining spending in certain types of private construction.
"While demand for construction remains robust, it is no longer growing like it was earlier this year," said Ken Simonson, the association's chief economist. "There is little doubt that new public-sector investments in our aging infrastructure could help reinvigorate demand for construction."
Construction spending in August totaled $1.142 billion at a seasonally adjusted annual rate, essentially unchanged from the month before, Simonson said. He added that the year-to-date increase of 4.9% for January through August 2016, compared with the same months of 2015, shows that demand for construction projects remains relatively robust despite some recent monthly declines. But he cautioned that the month-to-month figures indicate that demand for construction is no longer growing like it was earlier this year.
Private nonresidential construction spending decreased 0.4% for the month but is up 4.2% year-to-date. The largest private nonresidential segment in August was power construction (including oil and gas pipelines), which declined 1.5% for the month but up 2.9% year-to-date. The next-largest segment, manufacturing, dropped by 1.4% for the month and is down 7.4% year-to-date. Commercial (retail, warehouse, and farm) construction decreased by 2% in August and climbed 6.9% year-to-date. Private office construction climbed 2.3% for the month and 28% year-to-date.
Private residential construction spending dropped by 0.3% between July and August 2016, but is up 1.4% year-to-date. Spending on multifamily residential construction increased by 2.4% for the month and remains up 13.9% year-to-date, while single-family spending fell 0.9% from July to August and is down 1.5% year-to-date.
Public construction spending declined 2% from a month before and dropped by 8.8% year-to-date. The biggest public segment — highway and street construction — decreased by 2.9% for the month and is down 8.3% year-to-date. The other major public category — educational construction — fell by 0.4% in August and dropped 0.8% year-to-date.
Association officials said that the new construction spending figures underscore the need for Congress to pass legislation like the Water Resources Development Act to finance repairs to aging water systems. They said this measure, combined with other needed investments in public infrastructure, could help offset declining private sector demand and re-invigorate the construction sector's recovery.
"The construction industry's recovery appears to have hit a plateau," said Stephen E. Sandherr, the association's chief executive officer. "The sector is at the point where new public-sector investments could really help take up the slack being left by declines in some types of private-sector construction activity."