Dive brief:
- Non-residential construction spending rose 0.1% in August 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 Tuesday.
- Public projects, such as roads and streets, continue to drive overall construction spending, while private investment remains limited by continuing economic pressures, including high borrowing costs and weak demand in certain sectors, said Anirban Basu, ABC chief economist.
- “Non-residential construction spending picked up gradually in August, and this was almost entirely due to ongoing infrastructure investments,” Basu said in the statement. “Government spending accounted for all of the monthly increase in the non-residential segment and has increased by almost 8% over the past year, significantly outpacing privately financed non-residential construction activity.”
Diving knowledge:
According to one Associated General Contractors of America Report.
However, many of these projects have yet to begin due to permitting issues and regulatory requirements, said Ken Simonson, AGC’s chief economist.
“Although the federal government has announced thousands of project awards in the past three years, most of the money has yet to be converted into construction contracts, let alone ongoing work,” Simonson said. “There is still great potential for infrastructure and energy projects, but the timing remains uncertain.”
Spending increased monthly in 10 of 16 non-residential subcategories, according to data from the US Census Bureau.
For example, spending on highway and street projects rose nearly 1 percent in August to $142.34 billion, the data showed. Manufacturing construction spending led all categories, reaching $238.26 billion, up about 0.1% over the past month.
Still, private nonresidential spending fell 0.1%, while public spending on nonresidential construction rose 0.3% in August.
The contrast between public and private spending highlights broader economic challenges affecting the private sector, such as tighter credit conditions and inflationary pressures. Over the past year, non-residential public spending rose by almost 8%, while private spending rose by less than half, at just 3.6%. That said, the combined growth in both sectors is enviable compared to many other countries around the world
At the same time, with privately funded projects experiencing only moderate growth in the US, the outlook for the sector depends on how quickly the support of falling interest rates can have an effect, Basu said.
“As a result of continued weakness in certain private sub-segments, ABC’s construction portfolio indicator has fallen by a full month over the past year,” Basu said. “While falling interest rates will eventually serve as a headwind for the industry, it may be several quarters before the privately funded segments see substantial relief.”
