Construction Spending Reaches Four-Year High

December 3, 2013

Despite a dip in private residential and nonresidential activity, total construction spending in October reached its highest level since May 2009 due to an unusual surge in public construction, according to analysis of federal data by the Associated General Contractors of America (AGC).

"Nearly every category of public construction increased in October, according to the preliminary Census figures, although for the first 10 months of 2013 combined, public spending continues to lag the 2012 year-to-date total," said Ken Simonson, AGC's chief economist. "Meanwhile, residential spending slipped for the month but still showed strong year-to-date gains, and nonresidential spending remained stuck in neutral."

Construction put in place in October totaled $908 billion, 0.8 percent higher than in September. Figures for August and July were revised down below levels that initially exceeded the current October estimate. The total for the first 10 months of 2013 was 5 percent above the year-to-date mark for the same months in 2012.

Public construction spending rose 3.9 percent for the month but remained 2.8 percent below the 2012 year-to-date total The two largest public components were mixed: highway and street construction increased 0.6 percent in October and 0.3 percent year-to-date, while educational construction jumped 8.5 percent for the month but fell 8.5 percent year-to-date, Simonson said.

Private residential spending declined 0.6 percent for the month but rose 17 percent year-to-date. New single-family construction decreased 0.6 percent in October but jumped 30 percent in the first 10 months of 2013 compared with 2012. New multifamily spending advanced 2.2 percent in October and 46 percent year-to-date.

Private nonresidential spending edged down 0.5 percent for the month and up 0.8 percent year-to-date, Simonson observed. The largest private nonresidential category, power - including oil and gas as well as electricity - plunged 5.7 percent and 5.8 percent over the two time periods. But the next three niches in size—manufacturing, commercial (retail, warehouse and farm), and office—rose for the month and year-to-date.

"Construction will likely display varied patterns in the next several months," Simonson said. "Multifamily construction will keep burgeoning but single-family homebuilding may stall. Private nonresidential spending should benefit from more power, energy and manufacturing work. Public construction remains threatened."

AGC officials said Congress and the administration should keep public construction from returning to its recent slump by quickly completing Water Resources Development legislation that has already passed both houses and passing a new surface transportation bill next year that funds repairs to deteriorating highway, bridge and transit infrastructure. They added that any new transportation bill must include provisions to adequately fund the nearly depleted federal Highway Trust Fund.

"If Congress can act in a bipartisan way on transportation funding as it did on the Water Resources bill, it can avoid a cliff-like drop in highway spending," said Stephen E. Sandherr, AGC's CEO.