Construction Spending Remains Steady in July, Up by 5.6% for First Seven Months of 2016

Construction spending remained steady in July compared to June but is up by 5.6 percent for the first seven months of the year compared to same period in 2015, according to an analysis by the Associated General Contractors of America. Association officials said the growth in construction spending is occurring as most construction firms report they are having a hard time finding skilled craft workers to keep pace with demand.

“On balance, there is still strong demand for construction, especially for multifamily and private nonresidential structures, while home building continues an uneven recovery,” said Ken Simonson, the association’s chief economist. “But public investment in infrastructure and educational construction has been tepid.”

Construction spending in July totaled $1.153 trillion at a seasonally adjusted annual rate, essentially unchanged from the month before, Simonson said. He added that the year-to-date increase of 5.6 percent for January through July 2016, compared with the same months of 2015, shows demand for construction continues to experience robust growth. He noted that private nonresidential spending reached a record high for the third straight month at a seasonally adjusted annual rate, while multifamily spending hovered just below the record set in March.

Private nonresidential construction spending increased 1.7 percent for the month and is up 8.6 percent year-to-date. The largest private nonresidential segment in July was power construction (including oil and gas pipelines), which grew 1.1 percent for the month and is up 8.3 percent year-to-date. The next-largest segment, manufacturing, expanded by 3.9 percent for the month but is down 2.7 percent year-to-date. Commercial (retail, warehouse and farm) construction increased by 1.2 percent in July and climbed 10.1 percent year-to-date. Private office construction soared 4.6 percent for the month and 27 percent year-to-date.

Private residential construction spending edged up by 0.3 percent between June and July 2016, and is up 6.6 percent year-to-date. Spending on multifamily residential construction dropped 0.6 percent for the month but remains up 22 percent year-to-date, while single-family spending fell 0.2 percent from June to July but is up 9 percent year-to-date.

Public construction spending declined 3.1 percent from a month before and is now up by only 0.2 percent for the first seven months of 2016 combined. The biggest public segment—highway and street construction—increased by 0.3 percent for the month and is up 2.6 percent year-to-date. The other major public category—educational construction—fell by 8.3 percent in July but gained 4.0 percent for the combined January-July period.

Association officials said that as construction demand continues to expand, many firms report having a hard time finding workers, particularly craft workers, to hire. The association released a survey yesterday that found two-thirds of firms reporting difficulty finding craft workers. Officials said the country needed a series of new measures to help recruit and train new construction workers to keep pace with demand.

“As the construction industry continues to expand, firms in many parts of the country are eager to expand their headcount,” said Stephen E. Sandherr, the association’s CEO. “But without the kind of workforce measures we have been pushing for, our schools will continue to graduate students for careers that don’t exist while firms search for workers with skills that aren’t taught.”