Spending on construction increased slightly in August but was up 7.4% compared to August 2022. Nonresidential spending increased 17.6% over the 12 months, offsetting a 3.0% decline in residential, according to analysis by Associated Builders and Contractors.
Nonresidential spending increased in 12 of the 16 sectors in August, including a 0.4% increase in highway and street construction. Compared to August 2022, highway and street spending jumped 12.1%.
Construction spending, not adjusted for inflation, totaled $1.983 trillion at a seasonally adjusted annual rate in August, according to the Associated General Contractors of America. That figure is 0.5 percent above the July rate, which was revised up from the initial estimate. Spending on private residential construction increased for the fourth consecutive month in August, by 0.6 percent. Spending on private nonresidential construction increased by 0.3 percent in August, while public construction investment increased 0.6 percent.
“For now, all types of construction are growing,” said Ken Simonson, AGC’s chief economist. “But unless the supply of qualified workers increases, many projects are likely to be delayed.”
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Residential spending grew by 0.6 percent from July to August. Single-family homebuilding contributed the majority share of the growth, expanding by 1.7 percent for the month. New multifamily construction was up 0.6 percent compared to July.
Spending was mostly positive among large nonresidential segments. Spending on manufacturing plants increased 1.2% between July and August. Spending on power, highway and street, office, and health care construction each grew by 0.4% for the month. Educational construction was flat. In contrast, commercial construction—comprising warehouse, retail, and farm construction—fell by 0.9 percent in August compared to a month ago.
“Aggregate nonresidential construction spending expanded at a respectable rate in August,” said Anirban Basu, chief economist for ABC. “But manufacturing-related and public sector projects accounted for more than 100% of the monthly increase. Privately financed commercial- and educational-related construction spending declined by almost 1% at least partially due to elevated borrowing costs.
“Despite high interest rates and ongoing weakness in certain segments like office and retail, contractors remain relatively upbeat,” said Basu. “Despite still-high materials costs and ongoing labor shortages, a plurality of contractors expect their profit margins to increase over the next six months, according to ABC’s Construction Confidence Index.”
