Construction Spending Falls to $2.132 Trillion Seasonally Adjusted Annual Rate as Construction Activity is Yet to Start on Many Federally Funded Projects and Multifamily Housing Glut Leads to Reduced Outlays
Construction spending inched down by 0.1 percent from July to August as a downturn in single- and multifamily residential building outweighed selective gains in nonresidential projects, according to an analysis of a new government report that the Associated General Contractors of America released today. Association officials said the slight decline reflects the fact that many federally funded construction projects have yet to begin and investment on housing slows amid a glut in newly completed buildings.
“Although the federal government has announced thousands of project awards in the past three years, most of the money has yet to turn into construction contracts, let alone work under way,” said Ken Simonson, the association’s chief economist. “There is still great potential for infrastructure and power projects, but the timing remains uncertain. Meanwhile, single-family homebuilding should pick up as mortgage rates decline, but multifamily construction is likely to shrink until the current glut of apartments is absorbed.”
Construction spending totaled $2.132 trillion at a seasonally adjusted annual rate in August. That figure is 0.1 percent below the downwardly revised July rate but 4.1 percent above the August 2023 level.
Private residential spending declined 0.3 percent in August but increased 2.7 percent compared to August 2023. Single-family homebuilding fell 1.5 percent for the month but saw a slight rise of 0.8 percent year-over-year. Multifamily construction decreased for the eighth consecutive month, dropping by 0.4 percent and falling 7.5 percent from August 2023 levels.
Private nonresidential spending edged down by 0.1 percent for the month but posted a 3.6 percent year-over-year gain. Of the three largest segments, manufacturing construction increased by 0.2 percent for the month and surged 18.1 percent year-over-year. Commercial construction (including warehouse, retail, and farm) fell by 0.4 percent for the month and plunged 14.8 percent compared to last year. Power construction declined by 0.3 percent for the month but rose 7.6 percent year-over-year.
Public construction spending rose by 0.3 percent for the month, with mixed trends among the top three segments. Highway and street construction increased by 1.1 percent, education construction remained flat, and transportation spending fell by 0.2 percent. Total public construction rose 7.8 percent year-over-year.
Association officials noted the federal government has done a good job in announcing projects that will receive construction funding. But they cautioned that delays with environmental permitting and confusion about new Buy America requirements are leading to delayed starts for many of those projects. They urged the Biden administration to accelerate permitting reviews and to give federal agencies greater flexibility in issuing Buy America waivers.
“Construction spending levels would likely be higher if the federal government could get out of its own way and allow projects to move forward,” said Jeffrey D. Shoaf, the association’s chief executive officer. “Promising money is good, allowing projects to move forward is even better.”