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Nonresidential Construction Drives Construction Spending in September

Total construction spending increased by 0.2% for the month of September and by 10.9% for the year as nonresidential construction activity now outpaces residential construction, according to an analysis the Associated General Contractors of America released Nov. 1 of federal spending data. Association officials noted that gains in public sector transportation construction have lagged other fast-growing segments as officials grapple with Buy America and other new regulatory requirements.


“Demand remains strong for a range of nonresidential construction segments despite supply chain challenges and rising interest rates,” said Stephen E. Sandherr, the association’s chief executive officer. “But transportation infrastructure investments would likely have been higher if it wasn’t for the inevitable regulatory confusion that comes with the new Buy America requirements.”


Construction spending, not adjusted for inflation, totaled $1.811 trillion at a seasonally adjusted annual rate in September, 0.2% above the August rate and 10.9% above the September 2021 rate. Spending on private residential construction was flat in September but is still up 12.7% compared to a year ago. Meanwhile spending on private nonresidential construction is up 1.0% in September and 10.5% for the year.


The biggest drivers for the increase in private nonresidential construction were manufacturing construction, which was up 7.6% for the month and 43.3% for the year; commercial construction, which was down 0.7% for the month but is up 22.6% for the year; and lodging construction, which was up 0.7% in September and 15.8% for the year. Private sector power construction continued to decline, down 0.4% for the month and 12.9% for the year.


Public construction spending decreased by 0.4% in September, with mixed results for the three largest segments. Highway and street construction spending was up 1.7% for the month and 8.7% for the year, while educational spending was flat for the month and down 1.0% for the year. Transportation construction spending decreased by 1.3% for the month but was up 3.2% for the year.