Contractors track broad drop in public construction spending

Source: Associated General Contractors of America, Washington, D.C.

Analyzing construction spending levels from the first half of 2017, AGC officials find significant declines in public-sector investment at a time when much of the nation’s infrastructure is deteriorating due to age or overuse.

“Construction spending is still increasing overall but growth has become much more uneven across categories in recent months,” says AGC Chief Economist Ken Simonson. “There has been a steep decline in public investment in nearly all types of construction over the past year. Private nonresidential construction is still rising overall but generally at slower rates than was occurring a few months ago.”

Construction spending in June totaled $1.206 trillion at a seasonally adjusted annual rate, a drop of 1.3 percent from the downwardly revised May total and up just 1.6 percent from a year earlier. Every public spending category recorded a decrease for the month and nearly all were lower than a year ago, while multifamily construction and several private nonresidential categories also declined or had smaller increases than previously.

Public construction spending plunged 5.4 percent from the prior month and 9.5 percent from June 2016 to June 2017. The spending rate in June was the lowest seasonally adjusted rate since February 2014. The biggest public segment—highway and street construction—slumped 8.1 percent from a year earlier. Among other major public infrastructure categories, spending on transportation facilities such as transit and airport construction dropped 3.9 percent year-over-year; spending on sewage and waste disposal plummeted 16.1 percent; and, spending on water supply fell 17.7 percent. Public spending on educational structures declined 7.3 percent from a year ago.

Private nonresidential spending inched up 0.1 percent for the month and 1.1 percent over 12 months. The largest private nonresidential segment was power construction (including oil and gas field and pipeline projects), which dropped 5.4 percent from June 2016 to June 2017. The next-largest segment, commercial (retail, warehouse and farm) construction, climbed 13.8 percent year-over-year. Manufacturing construction declined 7.7 percent for the year. Private office construction increased 12.6 percent since June 2016.

Private residential construction spending slipped by 0.2 percent between May and June 2017 but gained 9.2 percent over the year. Spending on multifamily residential construction edged up 0.6 percent from a year ago, while single-family was up 9.0 percent from the June 2016 rate.