Public sector lifts nonresidential construction spending as private projects lag

Dive Brief:

  • Nonresidential construction spending ticked up 0.2% in March to a seasonally adjusted annual rate of $1.19 trillion, according to Associated Builders and Contractors’ analysis of U.S. Census Bureau data.
  • The rise in March signals a positive shift following two consecutive months of construction spending contraction at the beginning of 2024, according to the report. But it was also lopsided, with civil works making gains as private projects, weighted down by higher interest rates and costs, continued to struggle.
  • “The increase was entirely due to increased public construction spending,” said Anirban Basu, ABC chief economist. “Ongoing spending strength, driven by both the public sector and the ascendant manufacturing category, continues to support healthy backlog for contractors.”

Dive Insight:

In contrast, private sector nonresidential spending was uneven, said Ken Simonson, chief economist for the Associated General Contractors of America. Overall, private nonresidential spending dropped 0.2%.

“Private nonresidential categories showed varied patterns, while multifamily construction continued to slip from record levels in 2023,” said Simonson in the AGC’s report on the numbers. “These diverse trends suggest there is still strong demand for projects, but a dearth of workers may be forcing a slowdown in spending.”

In total, nonresidential spending for both public and private projects now sits approximately 35% higher than the start of the pandemic. Over that span, spending in nonresidential construction also outpaced economy-wide inflation, said Basu.

Ten of the 16 nonresidential subcategories posted a monthly increase, according to the U.S. Census Bureau. Spending on highway and street construction popped 0.9% in March, while manufacturing spending increased 0.2%. On the other hand, commercial construction spending slipped 0.5%, according to the data.

AGC officials said the strong gains in public construction were good for the industry and the economy. However, they also highlighted worker shortages are likely leading to longer project completion times and suppressing monthly spending in private projects. 

To fix this, AGC advocates for a hike in funding for construction education and training, as well as a push for more people to lawfully enter the country to work in construction.

“Continuing economic growth requires investments in infrastructure, manufacturing and energy projects,” said AGC CEO Jeffrey Shoaf, who took the reins at the trade group in March, when former CEO Stephen Sandherr retired. “Investing in new construction education and training programs and enacting some common-sense immigration reforms is essential for ensuring the nation has enough workers with the skills to build these and other vitally needed projects.”

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