Construction spending stalls between July and August; decrease in non-residential projects negates residential growth: AGC

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Total construction spending was flat between July and August, as a decrease in nonresidential projects offset continuing gains in residential construction, according to a new analysis of federal construction spending data the Associated General Contractors (AGC) of America released on Oct. 1.

Officials urged the House of Representatives to promptly approve the bipartisan infrastructure bill that passed in the Senate earlier this year, noting that spending on infrastructure in the first eight months of 2021 declined from year-earlier levels.

“Nearly every nonresidential spending segment has deteriorated from already inadequate 2020 levels in the first two-thirds of this year,” said Ken Simonson, the association’s chief economist. “Meanwhile, soaring materials costs mean that fixed public budgets buy even less infrastructure than before.”

Construction spending in August totaled $1.58 trillion at a seasonally adjusted annual rate, virtually unchanged from July. Year-to-date spending increased 7.0 percent from the total for January-August 2020. Gains were limited to residential construction, while nonresidential construction spending slipped in August and year-to-date. The residential construction segment climbed 0.4 percent for the month and 26 percent year-to-date. Combined private and public nonresidential construction spending dropped 0.4 percent compared to July and 6.7 percent over the first eight months of 2021 compared to same interval in 2020.

Most infrastructure categories posted significant year-to-date declines, Simonson pointed out. The largest public infrastructure segment, highway and street construction, was 3.4 percent lower than in January-August 2020. Spending on public transportation construction slumped 6.5 percent year-to-date. Investment in sewage and waste disposal structures climbed 3.8 percent, while funding for public water supply projects slid 1.8 percent and conservation and development construction plunged 18 percent.

Other types of nonresidential spending also decreased year-to-date, Simonson added. Combined private and public spending on electric power and oil and gas projects declined 3.6 percent. Education construction slumped 10.6 percent. Commercial construction–comprising warehouse, retail, and farm structures–dipped 1.7 percent. Office spending fell 10.1 percent and manufacturing construction edged down 0.8 percent.

Association officials said the nearly universal decline in infrastructure spending demonstrates the urgency of enacting expanded funding for a range of infrastructure project types. They called on the House of Representatives to quickly pass the Bipartisan Infrastructure bill that already passed in the Senate by a wide margin.

“This legislation includes the kind of policy priorities that members of both parties have long claimed to support,” said Stephen E. Sandherr, the association’s chief executive officer. “There is no excuse for holding these projects hostage while sorting out other priorities. Construction workers, businesses, and the public are all losing from delay in passing this legislation.”

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