Sources: Associated General Contractors of America, Washington, D.C.; CP staff
Construction spending decreased in June for the third month in a row, but most segments posted solid increases in the first half of 2016 compared to the same period in 2015, according to an AGC analysis.
“The drop in construction spending over the past three months is probably more a reflection of the very strong gains posted early in the year than of cooling demand for construction,” says AGC Chief Economist Ken Simonson. “Nearly every major segment had first-half gains of more than 5 percent compared with a year ago. Contractors, surveys and the media all continue to report plenty of projects are starting or will soon.”
Construction spending in June totaled $1.134 trillion at a seasonally adjusted annual rate, 0.6 percent lower than the May total, he adds, noting that a) March–June spending declines followed unusually large increases in the previous three months, probably because of exceptionally mild winter weather in some regions; and, b) the year-to-date increase of 6.2 percent for January–June 2016, compared with the same months of 2015, provides a truer picture of the industry’s condition.
Private residential spending was virtually unchanged for the second month in a row and 7.8 percent higher year-to-date. Spending on multifamily residential construction slid 1.5 percent for the month but soared 22 percent year-to-date, while single-family spending fell 0.4 percent from May to June but rose 11 percent year-to-date. Private nonresidential construction spending decreased 1.3 percent for the month but climbed 7.9 percent year-to-date. The largest private nonresidential segment in June was power construction (including oil and gas pipelines), which slipped 0.7 percent for the month but rose 8.2 percent year-to-date. The next-largest segment, manufacturing, lost 4.5 percent for the month and 2.7 percent year-to-date. Commercial (retail, warehouse and farm) construction declined 1.6 percent in June but climbed 8.6 percent year-to-date.
Public construction spending declined 0.6 percent from a month before but was still up 1.5 percent for the first five months of 2016 combined. The biggest public segment—highway and street construction—shrank by 1.4 percent for the month but was up 3.9 percent year-to-date. The other major public category—educational construction—dipped by 0.5 percent in June but gained 5.9 percent for the combined January-June period.
Contractors report strong demand in many parts of the country and appear to continue to struggle to find enough workers to keep pace with construction demand. “We worry that the slowdown in hiring and spending has more to do with the fact contractors don’t have enough workers than the fact there isn’t enough work out there,” notes AGC CEO Stephen Sandherr.