Construction Spending in September Slips for Second Month in a Row

Monthly Declines Add New Challenges for an Industry Struggling to Recover from a Years-Long Downturn and Coping with Growing Shortages of Qualified Craft Workers, Association Officials Noted

Construction spending decreased for the second consecutive month in September as declines in public and private nonresidential construction, as well as multifamily projects, offset growth in single-family homebuilding, according to an analysis by the Associated General Contractors of America. Association officials said the new spending figures underscore how challenges current market conditions are for many firms.

"These data show that construction gains remain fragmentary and volatile, even though industry employment has been picking up in more states," said Ken Simonson, the association's chief economist. "Many categories of spending rose sharply over the past year but month-to-month changes have been mixed."

Construction spending in September totaled $951 billion at a seasonally adjusted annual rate, down 0.4 percent from the August total but 2.9 percent higher than in September 2013, Simonson noted. Private residential spending edged up 0.4 percent from August and 0.7 percent from a year earlier, while private nonresidential spending dropped 0.6 percent for the month but rose 6.3 percent year-over-year. The third component of the total-public construction spending-decreased 1.3 percent from August but increased 1.7 percent from a year ago.

The divergent patterns appeared through all sectors, Simonson added. Single-family home construction gained 1.1 percent for the month and 9.8 percent over 12 months, while multifamily spending fell 1.0 percent from the August level but jumped 26 percent from a year earlier. The largest private nonresidential type, power construction-which includes oil and gas fields and pipelines as well as electric power-slumped 3.1 percent in September but rose 2.3 percent from the prior year.

Commercial construction-comprising retail, warehouse and farm projects-increased 1.4 percent and 13 percent, respectively. Manufacturing construction decreased 1.1 percent for the month but leaped 17 percent year-over-year. Among the largest public segments, highway and street construction declined 3.7 percent and 1.7 percent, respectively, while public educational construction inched up 0.1 percent from August and 8.4 percent from September 2013.

Association officials said the monthly declines in construction spending added new challenges to an industry struggling to recover from a years-long downturn and coping with growing labor shortages amid demographic and economic shifts. They said Washington officials could help by enacting long-term infrastructure measures and taking steps to make it easier for schools, associations and businesses to prepare future construction workers.

"With labor markets tight yet demand flattening, many contractors are having a hard time deciphering current economic conditions," said Stephen E. Sandherr, the association's chief executive officer. "The tepid economic recovery is creating new challenges without eliminating many of the problems that came with the downturn for most contractors."

Source: AGC of America