Construction Spending Falls with Declines in Residential, Nonresidential Activity Amid Growing Labor and Materials Shortages

Total construction spending fell by 1.1% in June as spending on new housing and nonresidential projects declined compared to May, according to an analysis the Associated General Contractors of America released of federal spending data. Association officials said that the construction spending figures are being impacted as materials and labor shortages are slowing schedules and increasing the cost of construction.

Construction spending, not adjusted for inflation, totaled $1.76 trillion at a seasonally adjusted annual rate in June. That figure was 1.1% below the upwardly revised May rate and 8.3% higher than in June 2021. Private nonresidential construction spending declined for the fourth month in a row, slipping 0.5% from May, although the June rate was 1.7% higher than in June 2021.

Public construction spending decreased for the second-straight month, falling 0.5% from May but was up 0.4% from the year-ago rate. Residential spending fell by 1.6% for the month, but is up 15.4% compared to last June.

The downturn in nonresidential construction spending was widespread. The largest segment, power — comprising electric, oil and gas projects — slipped 1.7% in June. Spending on commercial construction — warehouse, retail and farm projects — declined 0.5%. Educational construction spending decreased 0.5%. Among the five largest segments, only manufacturing construction did not fall, but was unchanged from the prior month.