Construction Spending Rises Modestly in April for Third Straight Month

Each Category Shows Areas of Strength but Also Pockets of Weakness; Association Officials Warn Uneven Pattern is Likely to Last, with Public Outlays Dropping Sharply if Highway Trust Fund Lapses

Total construction spending rose modestly for the third straight month in April as a mix of increases and declines in public and private categories showed the sector’s recovery remains fragile and fragmented, according to an analysis of new Census Bureau data by the Associated General Contractors of America (AGC). Association officials said the industry could benefit from new federal investments in infrastructure to offset declining public sector demand.

“Residential, private nonresidential and public construction spending all have areas of strength but also pockets of weakness,” said Ken Simonson, the association's chief economist. “While the overall trend remains more positive than last year, growth is likely to be spotty for the foreseeable future.”

Construction put in place totaled $954 billion in April, 0.2 percent above the revised February total and 8.6 percent higher than in April 2013. The year-over-year growth so far in 2014 has exceeded the full-year increase of 5.0 percent recorded from 2012 to 2013.

Private residential construction spending inched up 0.1 percent in April to a six-year high. The latest total exceeded the year-ago level by 17 percent. Single-family construction rose 1.3 percent in April and 14 percent year-over-year. Multifamily spending soared 4.4 percent and 31 percent, respectively. Improvements to existing single- and multifamily structures slumped 2.2 percent for the month but increased 17 percent from a year ago.

Private nonresidential spending dipped 0.1 percent in April but climbed 5.6 percent over 12 months. Most major categories increased from year-ago levels. However, the largest private segment, power construction—comprising work on oil and gas fields and pipelines as well as electricity projects—slipped 0.6 percent for the month and 3.9 percent over the year. The fastest-growing private type was office construction, which jumped 3.1 percent in April and 26 percent since April 2013.

Public construction spending rose 0.8 percent for the month and 1.2 percent year-over-year. The largest public segment, highway and street construction, declined 1.1 percent in April but increased 4.9 percent from a year before. The second-biggest category, educational construction, gained 3.0 percent and 4.9 percent, respectively.

“The outlook for the rest of 2014 remains uneven,” Simonson predicted. “Demand for apartments appears to be very strong, but there are several warning signs about homebuilding. Despite dropping last month, power and manufacturing construction should remain the leading private nonresidential categories, with hefty growth for the year as a whole. The rebound in public construction that occurred last month may not be repeated soon.”

Association officials said that public investments in highway and street construction will decline significantly unless Congress and the Obama administration act before July to shore up the Federal Highway Trust Fund. Current estimates indicate the fund will run out of money by July, likely putting a halt to federal spending on surface transportation projects across the country.

Source: AGC of America