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Construction Spending Remains Flat

Thursday, October 6, 2016

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U.S. construction spending was down ever so slightly in August, according to new data released by the Department of Commerce, which also revised its July numbers to reflect a slight downward trend.

The Commerce Department numbers released Monday (Oct. 3) put American construction spending at $1.142 trillion (seasonally adjusted) in August, down 0.7 percent from July’s tally of $1.15 trillion. The revised July figures show a 0.3 percent drop from the prior month.

Home under construction
© iStock.com / dpproductions

Private construction spending, both residential and nonresidential, showed a slight decrease from July (down 0.3 percent for residential and 0.4 percent for nonresidential), but was still up compared with prior-year numbers.

The figures also indicate a 0.3 percent decline in total construction spending as compared with prior-year numbers, from August 2015. The decline, however, is due to drops in government construction spending; private construction numbers are up from a year ago.

The Associated General Contractors of America, in an analysis released Monday (Oct. 3), notes that the slight month-over-month declines are statistically negligible, and essentially show a market that’s holding steady.

Numbers across the board had generally shown a growth trend earlier in the year, but the August numbers, while representing only a small decrease, put an end to the month-after-month increases in spending of the spring and early summer.

Overall Declines, Private Sector Gains

All three main sectors—private residential, private nonresidential and governmental—posted declines in spending from July to August, according to the new numbers. Residential construction spending dropped 0.3 percent, nonresidential declined 0.4 percent, and government spending on construction dropped a full 2 percent from July to August.

Hospital construction site
© iStock.com / Devilkae

Public construction spending is down across the board, with one exception: government health-care facility construction, up 3.6 percent from July, and up 6.2 percent from August 2015.

Private construction spending, both residential and nonresidential, showed a slight decrease from July (down 0.3 percent for residential and 0.4 percent for nonresidential), but was still up compared with prior-year numbers. Total private construction was up 2.7 percent over August 2015, with residential showing a 1.4 percent gain and nonresidential growing by 4.2 percent.

The greatest increases in private construction spending year over year for August were in office buildings (up 28 percent) and lodging (up 17.7 percent).

Government Spending Down

Governmental construction dollars, on the other hand, are becoming more scarce, judging from the Commerce figures. While public spending on residential construction rose 3 percent from July to August, spending in nearly every category of governmental construction is down from prior-year numbers.

The lone exception: government health-care facility construction, up 3.6 percent from July, and up 6.2 percent from August 2015. Governmental entities spent $8.57 billion on health-care sector construction in August 2016.

“While demand for construction remains robust, it is no longer growing like it was earlier this year,” said Ken Simonson, chief economist for the AGC. “There is little doubt that new public-sector investments in our aging infrastructure could help reinvigorate demand for construction.”

   

Tagged categories: Commercial Construction; Construction; Department of Commerce; Economy; Residential Construction; Spending

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