Total construction spending increased by 0.5 percent in June, driven by increases in most residential and nonresidential construction segments, according to an analysis of federal spending data the Associated General Contractors of America released Aug. 1. Association officials noted that spending on highway and street projects declined for the month in June, however, warning that regulatory confusion around issues like Buy America rules were delaying activity on many projects.
“Despite high interest rates, private sector demand for most types of construction activity continues to expand,” said Stephen E. Sandherr, the association’s chief executive officer. “Ironically, demand softened in sectors like power and highway and street construction, where Washington has directed significant sums.”
Construction spending, not adjusted for inflation, totaled $1.938 trillion, at a seasonally adjusted annual rate in June. That figure is 0.5 percent above the May rate, which was revised up from the initial estimate. Spending on private residential construction increased for the second consecutive month in June, by 0.9 percent. Spending on private nonresidential construction was flat in June, while public construction investment increased 0.3 percent.
Spending was mostly positive among large nonresidential segments. The biggest component, commercial construction — comprising warehouse, retail and farm construction — increased 0.1 percent in June compared to May. Spending on manufacturing plants increased 0.3 percent between May and June. Spending on office construction grew by 0.7 percent for the month. Educational construction grew by 0.1 percent compared to the prior month. However, spending on power construction fell by 1.3 percent for the month and highway and street construction fell by 0.1 percent compared to May.
Residential spending grew by 0.9 percent from May to June. Single-family homebuilding contributed the majority share of the growth, expanding by 2.1 percent. New multifamily construction also was up 1.5 percent compared to May.
Association officials said the spending increases for most categories were welcome news and a sign of continued economic strength. But they warned that confusion about some of the regulatory requirements associated with the federal construction funding – including incomplete guidance on new Buy America rules – was delaying many construction projects where funding has been announced but construction has yet to start.
“Confusion about some of the strings that come with the new federal construction funds is limiting the economic impact of these investments for now,” Sandherr said. “The sooner the administration clarifies questions around Buy America and the rules around clean energy investments, the sooner construction can begin on many infrastructure and power projects across the country.”