Dive brief:
- Non-residential construction spending rose 0.1% again in September at a seasonally adjusted annual rate of $1.22 trillion, according to an analysis of U.S. Census Bureau data from Associated Builders and Contractors released Friday.
- Public sector projects, up 0.4% in September, drove the momentum, while private non-residential fell 0.1%, the report said.
- “Construction spending edged up in September, with growth driven by ongoing infrastructure investment,” ABC chief economist Anirban Basu said in the statement. “Spending accelerated in several publicly funded segments in September, including roads and streets, wastewater, waste disposal and water supply.”
Diving knowledge:
Spending increased in most infrastructure segments, said Ken Simonson, chief economist for the Associated General Contractors of America.
For example, spending on highway and street construction reached $141.95 billion in September, up 1.5% over the past 12 months, while spending on transportation projects reached $70.13 billion, a 7.2% increase over the past year, according to the data.
In other words, federal infrastructure funding continues to drive overall construction spending, with public sector investments offsetting the slowdown in private projects.
This largely reflects economic pressures on the private sector, where high borrowing costs and tight credit conditions continue limit new developments.
Over the past year, government spending has consistently outpaced private investment, according to data from the US Census Bureau. Public spending has increased by 7% over the past 12 months, while private spending has increased by 3.5%.
But there is still optimism for a private sector rebound, Basu said.
“Despite the drop in September, private spending on non-residential construction remains less than 1% below the all-time high set in June,” Basu said. “Given ongoing mega-manufacturing projects and healthy backlog levels, according to ABC’s construction backlog indicator, the non-residential segment should hold up well as the industry expects costs to come ‘lower debt and more flexible lending standards’.
For example, data center construction spending was up 0.6% for the month and about 48% over the past 12 months, Simonson noted.
Spending rose monthly in half of the 16 non-residential subcategories, according to ABC. Manufacturing construction spending reached $235.35 billion in September, up 20.5% on the year. Meanwhile, spending on commercial construction, such as retail and warehouse projects, fell to $125.3 billion in September, a roughly 13.3 percent drop for the year, the data showed.
