Construction spending remained in a yearlong holding pattern in September as declining public outlays offset growth in multifamily spending and several private nonresidential categories, according to an analysis by the Arlington, Virginia-based Associated General Contractors (AGC) of America. Association officials say declining investments in public infrastructure are undermining the sector's recovery and urge Congress to act on pending water resources legislation and voters to support ballot measures designed to rebuild aging infrastructure.
"There is still plenty of oomph in private demand for construction and growing support for school construction, but public infrastructure investment is crumbling just when it is needed most," says Ken Simonson, the association's chief economist. "These conflicting trends have left total construction spending nearly flat for the past 15 months."
Construction spending in September totaled $1.150 trillion at a seasonally adjusted annual rate, down 0.4 percent from the month before and down 0.2 percent from the September 2015 level, Simonson says. He added that the year-to-date total for January through September 2016 compared with the first nine months of 2015 remains positive, with an overall increase of 4.4 percent, despite a deterioration in public spending, thanks to gains in private nonresidential and residential spending.
Public construction spending declined 0.9 percent from August 2016—the sixth decrease in the past seven months—bringing the year-to-date total for the first nine months of 2016 down 2.2 percent from the same period in 2015. Public educational spending rose 3.8 percent year to date, but public infrastructure spending declined across the board. Public spending on highway and street construction slipped 0.7 percent; other transportation facilities, such as transit and airports, dropped 4.8 percent; sewage and waste disposal slumped 8.9 percent; water supply fell 8.3 percent; and conservation and development declined 4.5 percent, the AGC says.
Private nonresidential construction spending decreased 1 percent for the month but is up 7.8 percent year to date. The largest private nonresidential segment in September was power construction (including oil and gas pipelines), which declined 1.4 percent for the month but is up 7.4 percent year to date. Manufacturing, the next-largest segment, according to the AGC, dropped by 1.5 percent for the month and by 2.5 percent year to date. Commercial (retail, warehouse and farm) construction decreased by 2.4 percent in September but climbed 8.6 percent year to date. Private office construction slipped 0.4 percent for the month but soared 27 percent year to date.
Private residential construction spending increased by 0.5 percent between August and September and rose 5.8 percent year to date. Spending on multifamily residential construction increased by 2 percent for the month and by 18.8 percent year to date, while single-family spending inched up 0.1 percent for the month and 6 percent year to date.
Association officials say even though a handful of states have recently passed measures to increase investments in infrastructure, many other states have cut back on their funding for public works. They urge voters to approve state and local funding measures to repair aging infrastructure. They also urge Congress to enact legislation to finance repairs to the nation's aging waterways and port systems.
"Public-sector funding cuts for infrastructure aren't just hurting the construction industry, they are also slowing commutes and undermining quality of life in many communities," says Stephen E. Sandherr, the association's chief executive officer. "Voters should send a strong message that they want to drive better roads, drink better water and learn in better facilities."
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