Construction Spending Edges Down in September and Is Up Modestly for the First Nine Months of the Year

December 2016

Construction spending remained in a yearlong holding pattern in September as declining public outlays offset strong growth in multifamily spending and several private nonresidential categories, according to an analysis by the Associated General Contractors of America. AGC officials said declining investments in public infrastructure are undermining the sector’s recovery and urged Congress to act on pending water resources legislation and voters to support ballot measures designed to rebuild aging infrastructure.
    
“There is still plenty of oomph in private demand for construction and growing support for school construction, but public infrastructure investment is crumbling just when it is needed most,” said Ken Simonson, the association’s chief economist. “These conflicting trends have left total construction spending nearly flat for the past 15 months.”
    
Construction spending in September totaled $1.150 trillion at a seasonally adjusted annual rate, down 0.4 percent the month before and down 0.2 percent from the September 2015 level, Simonson said. He added that the year-to-date total for January through September 2016 compared to the first nine months of 2015 remains positive, with an overall increase of 4.4 percent despite a deterioration in public spending, thanks to gains in private nonresidential and residential spending.
    
Public construction spending declined 0.9 percent from a month before—the sixth decrease in the past seven months—bringing the year-to-date total for the first nine months of 2016 down 2.2 percent from the same period in 2015. Public educational spending rose 3.8 percent year-to-date but public infrastructure spending declined across the board.
    
Private nonresidential construction spending decreased 1.0 percent for the month but is up 7.8 percent year-to-date. The next-largest segment from power construction, manufacturing, dropped by 1.5 percent for the month and is down 2.5 percent year-to-date. Commercial (retail, warehouse and farm) construction decreased by 2.4 percent in September but climbed 8.6 percent year-to-date. Private office construction slipped 0.4 percent for the month but soared 27 percent year-to-date.
    
Private residential construction spending increased by 0.5 percent between August and September and rose 5.8 percent year-to-date. Spending on multifamily residential construction increased by 2.0 percent for the month and 18.8 percent year-to-date, while single-family spending inched up 0.1 percent for the month and rose 6.0 percent year-to-date.