Residential Spending Decline Offsets Growth in Nonresidential Growth

Spending on new houses and apartments decreased in July, offsetting increases in private nonresidential and public construction, according to the Associated General Contractors of America (AGC). Total construction spending for the month decreased by 0.4 percent compared to June. Year over year, spending is up 8.5 percent.

“There were gains for the month for nearly every private nonresidential category, along with a jump in highway and transportation work,” said Ken Simonson, chief economist, in a prepared statement.

Construction spending, not adjusted for inflation, totaled $1.78 trillion at a seasonally adjusted annual rate in July, 0.4 percent below the upwardly revised June rate but 8.5 percent higher than in July 2021.

Private nonresidential construction spending rose for the third month in a row, increasing 0.4 percent from June. Public construction spending climbed 1.5 percent from June. However, these increases were negated by a 1.5-percent decline in private residential spending. That segment was dragged down by a 4.0-percent slide in new single-family spending and a dip of 0.6 percent in multifamily spending.

Ten of the 11 private nonresidential categories tracked by the government had at least minor upturns in July, Simonson said. The largest private segment, commercial construction—warehouse, retail, and farm projects—increased 0.7 percent. Power construction, including spending on oil and gas projects, rose marginally. Manufacturing construction added 0.6 percent. Office construction spending, including data centers, climbed 0.6 percent.

The largest public category, highway and street construction, increased 4.3 percent for the month. Other major segments were mixed: spending on education structures inched down 0.1 percent, and outlays for transportation facilities rose 1.4 percent.

Association officials said that labor shortages and supply chain problems are undermining total construction activity.

“It is hard to build without builders,” said Simonson. “Getting more people exposed to construction is the surest way to expand the industry’s workforce and put more people into high-paying construction careers.”

Source: AGC