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Dive brief:
- Expenses in the construction of the data center has risen 28.1% over the past year, reaching a seasonally adjusted annual rate of $50.7 billion in April, according to an analysis by Associated Builders and Contractors.
- Outside of this boom, momentum elsewhere “has been hard to find,” said Anirban Basu, ABC’s chief economist. Non-residential construction spending rose just 0.1% month-on-month in April, according to the ABC report.
- Public projects and data centers accounted for most of the nominal growth as private construction spending fell for a seventh straight month in April, the report said.
Diving knowledge:
The results suggest strong activity around fewer types of projects, primarily data centers, but also highway and infrastructure work, Basu said.
“Non-residential construction spending edged up in April, but this growth was entirely due to a sizeable increase in public sector activity,” Basu said. “Private-sector construction momentum has been hard to find outside of the still-rising data center segment.”
Much of that weakness comes from the manufacturing construction sector, Basu said. Spending on manufacturing projects fell 1.2% month-on-month in April and is down 18.4% over the past year. Commercial construction also fell, down 0.5% in April from March, according to the ABC report.
But data centers are still fueling optimism, even as the rest of the market weakens.
“These data center projects have boosted ABC’s construction backlog indicator and kept ABC members confident about their outlook, at least as a whole,” Basu said. “While this particular tailwind will persist for some time, rising material prices and a lack of momentum in many business segments may affect contractor sentiment.”
Government spending on construction rose 0.4% month-on-month in April and rose 3.7% from a year earlier, the data showed. The largest public category, highway and street construction, rose 0.4% month-on-month in April and 4% over the past year.
Lawmakers now face a Sept. 30 deadline to renew federal funding for surface transportation. The Associated General Contractors of America said the step is critical to maintain boost in highway construction.
“Any interruption in funding for these vital projects would force contractors to lay off construction workers and delay the purchase of needed equipment and materials,” said AGC CEO Jeffrey Shoaf. “This would be a major setback for the overall economy.”
The highways and streets segment alone accounts for more than a quarter of total public spending on construction, AGC reported.
“Highway construction has been a major contributor to total nonresidential spending,” said Ken Simonson, AGC’s chief economist. “Over the past few months, total spending has only increased when there was an increase in year-over-year highway construction activity.”
