Construction spending declined for the fourth consecutive month in June as decreases in single-family, highway and educational projects outweighed increases in several private nonresidential categories, according to an analysis by the Associated General Contractors of America of government data released today. As state and local government face budget deficits, association officials cautioned that investments in infrastructure and other construction projects are likely to continue falling unless Congress and the Trump administration provide additional, targeted and dedicated infrastructure funding.
“Regrettably, the overall downward trend in spending is likely to continue and to spread to more project types as work that began before the pandemic hit finishes up,” said Ken Simonson, the association’s chief economist. “Unless the federal government invests heavily—and promptly—in infrastructure projects, both public and private nonresidential investment are likely to shrink further.”
Construction spending in June totaled $1.36 trillion at a seasonally adjusted annual rate, a decline of 0.7% from May and the lowest total in a year. After reaching a record high in February of $1.44 trillion, total spending has slumped by 6.0%, the steepest four-month contraction in a decade, the economist noted.
Public construction spending decreased by 0.7% in June, dragged down by a 1.7% drop in highway and street construction spending and a 2.7% decline in educational construction spending, the two largest public segments. The next-largest segment, transportation facilities, also contracted, by 0.6%.
Private nonresidential construction spending inched up 0.2% from May to June, led by a gain of 0.7% in the largest segment, power construction. Among other large private spending categories, commercial construction—comprising retail, warehouse and farm structures—slumped 1.3%, while manufacturing construction rose 1.7% and office construction edged up 0.3%.
Private residential construction spending shrank by 1.5% in June as spending on single-family homebuilding plunged 3.6% to its lowest level since late 2016. In contrast, new multifamily construction spending climbed for the third month in a row, posting a 3.0% increase from May.
Association officials said that state and local budgets are getting hammered by declining economic activity related to the ongoing pandemic. They urged Congress and the administration to quickly pass new infrastructure and recovery measures to help reverse the declines in public spending. They added that those new investments would help put many people back to work in good-paying construction careers.
“It will be hard to rebuild the economy if state and local governments lack the resources needed to improve roads, retrofit schools and keep drinking water safe,” said Stephen E. Sandherr, the association’s chief executive officer. “Instead of letting people languish in unemployment, Washington can put people back to work simply by boosting investments in needed infrastructure and other construction projects.”
Related Stories
Market Data | Jan 8, 2021
Construction sector adds 51,000 jobs in December
Gains are likely temporary as new industry survey finds widespread pessimism for 2021.
Market Data | Jan 7, 2021
Few construction firms will add workers in 2021 as industry struggles with declining demand, growing number of project delays and cancellations
New industry outlook finds most contractors expect demand for many categories of construction to decline.
Market Data | Jan 5, 2021
Barely one-third of metros add construction jobs in latest 12 months
Dwindling list of project starts forces contractors to lay off workers.
Market Data | Jan 4, 2021
Nonresidential construction spending shrinks further in November
Many commercial projects languish, even while homebuilding soars.
Market Data | Dec 29, 2020
Multifamily transactions drop sharply in 2020, according to special report from Yardi Matrix
Sales completions at end of Q3 were down over 41 percent from the same period a year ago.
Market Data | Dec 28, 2020
New coronavirus recovery measure will provide some needed relief for contractors coping with project cancellations, falling demand
Measure’s modest amount of funding for infrastructure projects and clarification that PPP loans may not be taxed will help offset some of the challenges facing the construction industry.
Market Data | Dec 28, 2020
Construction employment trails pre-pandemic levels in 35 states despite gains in industry jobs from October to November in 31 states
New York and Vermont record worst February-November losses, Virginia has largest pickup.
Market Data | Dec 16, 2020
Architecture billings lose ground in November
The pace of decline during November accelerated from October, posting an Architecture Billings Index (ABI) score of 46.3 from 47.5.
AEC Tech | Dec 8, 2020
COVID-19 affects the industry’s adoption of ConTech in different ways
A new JLL report assesses which tech options got a pandemic “boost.”
Market Data | Dec 7, 2020
Construction sector adds 27,000 jobs in November
Project cancellations, looming PPP tax bill will undercut future job gains.