Association Reports Construction Spending Posts Small Increase, Coronavirus + Soaring Costs, Supply Disruptions Threaten Further Gains

Total construction spending ticked up from June to July, as gains in residential and public construction offset a dip in private nonresidential projects, according to a new analysis of federal construction spending data the Associated General Contractors of America recently released. Officials noted, however, that challenges remain for the industry, particularly because of continuing problems with coronavirus flare-ups and supply-chain disruptions.

“Although nonresidential construction is no longer in free fall, many categories face continuing challenges,” said Ken Simonson, the association’s chief economist. “The rapid spread of the delta variant of COVID-19 is causing a pullback in re-openings and travel that may lead some owners to postpone new projects. Meanwhile, materials price increases, limited supplies of key materials and long or uncertain delivery times are impeding the industry’s recovery.”

Construction spending in July totaled $1.57 trillion at a seasonally adjusted annual rate, an increase of 0.3% from June, and 9.0% higher than the pandemic-depressed rate in July 2020. Once again, residential construction saw monthly and year-over-year gains, while nonresidential construction spending posted mixed results. The residential construction segment climbed 0.5% for the month and 26.5% year-over-year. Combined private and public nonresidential construction spending inched up 0.1% compared to June but declined 4.2% compared to July 2020.

Private nonresidential construction spending fell 0.2% from June to July and 3.6% since July 2020. The largest private nonresidential category, power construction, decreased by 0.7% from June to July and 0.9% year-over-year. Among the other large private nonresidential project types, commercial construction — comprising retail, warehouse and farm structures — was essentially unchanged for the second month in a row but higher than in July 2020 by 4.6%. Manufacturing construction spending was also nearly unchanged for the month and up 1.8% from a year earlier. Office construction decreased 0.1% compared to June and 6.1% year-over-year.

Public construction spending increased 0.7% for the month but was 5.1% lower year-over-year. Among the largest segments, highway and street construction gained 1.9% compared to June but dipped 0.1% over 12 months. Public educational construction fell 0.5% in July and 6.4% year-over-year. Spending on transportation facilities was up 0.3% from June but fell 4.2% from July 2020.

Association officials said the spending figures highlight some of the challenges the industry is facing amid a resurgent coronavirus and ongoing supply chain problems. “We are starting to get a more complete picture of how the resurgent coronavirus and policy responses to it are impacting the construction industry,” said Stephen E. Sandherr, the association’s CEO. “The industry will not be out of the woods without new federal infrastructure investments and support for workforce development.”