In January, Construction Spending Strength Was in Private Market

Arlington, VA, March 2, 2017—Construction spending slipped from December to January but increased modestly from a year ago, as private construction grew solidly but public infrastructure outlays tumbled, according to an analysis by the Associated General Contractors of America.

Association officials said the January data indicates the need for new public investments in infrastructure along the lines of the trillion dollar proposal President Trump outlined during his Congressional address last night.

"These numbers suggest that demand for residential and private nonresidential structures remain strong but all levels of government are struggling to fund needed projects," said Ken Simonson, the association's chief economist. "It appears that homebuilding, office and power construction will continue to grow through 2017, while manufacturing, highway and other transportation construction are likely to hold down overall growth."

Construction spending in January totaled $1.180 trillion at a seasonally adjusted annual rate, Simonson said. He added that the January rate was down 1.0% from the month before but up 3.1% from the January 2016 level.

Private residential construction spending increased by 0.5% between December and January and rose 5.9% over the past 12 months. Spending on multifamily residential construction jumped 2.2% for the month and 9.0% year-over-year, while single-family spending climbed 1.1% for the month and 2.3% from a year earlier.

Private nonresidential construction spending was flat for the month and increased 8.9% year-over-year. The largest private nonresidential segment in January was power construction (including oil and gas pipelines), which gained 1.4% for the month and 5.8% over 12 months. The next-largest segment, commercial (retail, warehouse and farm) construction, declined 0.5% in January but rose 12% year-over-year. Manufacturing construction rose 0.6% for the month but fell 6.8% from a year before. Private office construction spending dipped 0.5% for the month and but gained 34% compared with January 2016.

Public construction spending plunged by 5.0% from December to January and 9.0% from the January 2016 rate. Infrastructure categories were especially hard hit. Highway construction shrank 3.3% for the month and 10% year-over-year. Other transportation segments (transit, passenger rail, airports and ports) tumbled 8.1% for the month and 12% relative to January 2016. Sewage and waste construction plummeted by 4.2% and 27%, respectively. Water supply spending declined 12% and 11%, respectively.

Association officials said the President's call for new legislation to provide $1 trillion in investments to rebuild aging infrastructure would help boost demand for construction and support broader economic growth. They added that the President was right to insist that public funding must play a vital role in rebuilding the country's over-taxed public works.

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