Construction Spending Slips in January

Construction spending slipped from December to January but increased modestly from a year ago, as private construction grew solidly but public infrastructure outlays tumbled, according to an analysis by the Associated General Contractors of America. Association officials said the January data indicates the need for new public investments in infrastructure along the lines of the trillion dollar proposal President Trump outlined during his Congressional address last night.

“These numbers suggest that demand for residential and private nonresidential structures remain strong but all levels of government are struggling to fund needed projects,” said Ken Simonson, the association’s chief economist. “It appears that homebuilding, office and power construction will continue to grow through 2017, while manufacturing, highway and other transportation construction are likely to hold down overall growth.”

Construction spending in January totaled $1.180 trillion at a seasonally adjusted annual rate, Simonson said. He added that the January rate was down 1.0 percent from the month before but up 3.1 percent from the January 2016 level.

Private residential construction spending increased by 0.5 percent between December and January and rose 5.9 percent over the past 12 months. Spending on multifamily residential construction jumped 2.2 percent for the month and 9.0 percent year-over-year, while single-family spending climbed 1.1 percent for the month and 2.3 percent from a year earlier.

Private nonresidential construction spending was flat for the month and increased 8.9 percent year-over-year. The largest private nonresidential segment in January was power construction (including oil and gas pipelines), which gained 1.4 percent for the month and 5.8 percent over 12 months. The next-largest segment, commercial (retail, warehouse and farm) construction, declined 0.5 percent in January but rose 12 percent year-over-year. Manufacturing construction rose 0.6 percent for the month but fell 6.8 percent from a year before. Private office construction spending dipped 0.5 percent for the month and but gained 34 percent compared with January 2016.

Public construction spending plunged by 5.0 percent from December to January and 9.0 percent from the January 2016 rate. Infrastructure categories were especially hard hit. Highway construction shrank 3.3 percent for the month and 10 percent year-over-year. Other transportation segments (transit, passenger rail, airports and ports) tumbled 8.1 percent for the month and 12 percent relative to January 2016. Sewage and waste construction plummeted by 4.2 percent and 27 percent, respectively. Water supply spending declined 12 percent and 11 percent, respectively.

Association officials said the President’s call for new legislation to provide $1 trillion in investments to rebuild aging infrastructure would help boost demand for construction and support broader economic growth. They added that the President was right to insist that public funding must play a vital role in rebuilding the country’s over-taxed public works.

“As a group that has long advocated for a mix of new private and public sector investments to finance civil works projects, we were encouraged to hear the President make it clear that any new federal plan must include public investments as well as new private financing opportunities,” said Stephen E. Sandherr, the association’s CEO. “We are committed to working with Congress and the administration to ensure the President’s bold infrastructure vision becomes legislative reality.”