Construction spending declined for the third month in a row in May as a sharp slowdown in private projects more than offset a rise in public work, according to an analysis by the Associated General Contractors of America of government data released today. Association officials warned that the pickup in public projects is likely to reverse soon unless the federal government acts quickly to invest in needed infrastructure and shore up crumbling state and local budgets.
“Three short-lived factors may have boosted construction spending in May: emergency healthcare projects, acceleration of highway work to make use of the drop in road traffic, and the end to some state government shutdown orders,” said Ken Simonson, the association’s chief economist. “Unfortunately, these stimuli have now worn off, and there is a high risk that construction spending will soon shrink as state and local governments start a new fiscal year today with large budget gaps that they must close. Too often, they turn to postponing and canceling construction.”
Construction spending in May totaled $1.36 trillion at a seasonally adjusted annual rate, a decline of 2.1% from April and the lowest total since June 2019. Since February, total spending has slumped by 5.9%, the steepest three-month contraction since 2009, the economist noted.
The decrease in May was widespread across private construction categories, which recorded a spending decline of 3.3% from April, following a 3.8% slide from March to April. Public construction spending rose by 1.2% in May, an increase that only partially reversed a drop of 2.7% the month before.
“It is likely that the pickup in highway construction and other public spending that occurred in May will fade as soon as current projects are completed,” Simonson said. “Our latest survey of contractors, conducted June 9-17, found only about one-fifth of respondents had won new or expanded work—unchanged from early May. In addition, nearly one-third of respondents reported that an owner had canceled an upcoming project.”
Association officials said that private-sector funding is likely to continue to remain below pre-coronavirus levels for some time as many owners opt to delay investments amid pandemic-induced uncertainty. Meanwhile, many state and local investments in infrastructure and construction are likely to decline amid falling tax revenues. What is needed is a federal infrastructure measure that can attract broad, bipartisan support in the House and Senate, the association officials noted.
“The best way to get people back to work and to make our economy more efficient and effective for the long run is by improving the nation’s vital infrastructure,” said Stephen E. Sandherr, the association’s chief executive officer. “Leaders in both parties need to understand that messaging measures may excite the base, but they do nothing to improve roads, fix bridges or modernize water systems.”
Related Stories
Market Data | May 12, 2020
6 must reads for the AEC industry today: May 12, 2020
A 13-point plan to reduce coronavirus deaths in nursing homes and Bjarke Ingels discusses building on Mars.
Market Data | May 11, 2020
Interest in eSports is booming amid COVID-19
The industry has proved largely immune to the COVID-19 pandemic due to its prompt transition into online formats and sudden spike in interest from traditional sports organizations.
Market Data | May 11, 2020
6 must reads for the AEC industry today: May 11, 2020
Nashville residential tower will rise 416 feet and the construction industry loses 975,000 jobs.
Market Data | May 8, 2020
Construction industry loses 975,000 jobs in April as new association survey shows deteriorating demand for construction projects
Association partner Procore also releases near real-time construction data measuring impacts of coronavirus as association calls for new measures.
Market Data | May 8, 2020
7 must reads for the AEC industry today: May 8, 2020
The death of the office and Colorado's first multifamily project to receive WELL Precertification.
Market Data | May 7, 2020
5 must reads for the AEC industry today: May 7, 2020
5 memory care communities with a strong sense of mission and making jobsites safer in the COVID-19 world.
Market Data | May 6, 2020
6 must reads for the AEC industry today: May 6, 2020
5 questions engineers will ask after COVID-19 and coronavirus threatens push for denser housing.
Market Data | May 5, 2020
5 must reads for the AEC industry today: May 5, 2020
A new temporary hospital pops up in N.J., and apartment firms' reactivation plans begin to take shape.
Market Data | May 4, 2020
6 must reads for the AEC industry today: May 4, 2020
How working from home is influencing design and is this the end of the open office?
Market Data | May 4, 2020
The Los Angeles market continue to lead the U.S. hotel construction pipeline at the close of the first quarter of 2020
Nationally, under construction project counts hit a new all-time high with 1,819 projects with 243,100 rooms.