Nonresidential construction spending fell to a two-year low in March as contractors struggled with slumping demand for most project types and growing shortages of materials, transport, and workers, according to an analysis of new federal construction spending data by the Associated General Contractors of America. Officials with the association said project cancellations and widespread supply chain problems are hindering the industry’s recovery.
“Every major category of private nonresidential projects has declined over the past year, while public construction spending is also deteriorating rapidly,” said Ken Simonson, the association’s chief economist. “Unfortunately, the widespread and growing backlogs for key materials and shortages of trucking and rail services to deliver goods mean that even projects that are underway are likely to take longer to complete.”
Construction spending in March totaled $1.51 trillion at a seasonally adjusted annual rate, an increase of 0.8% from the pace in February and 5.3% higher than in March 2020. However, the year-over-year gain was limited to residential construction, Simonson noted. That segment jumped 1.7% for the month and 23% year-over-year. Meanwhile, combined private and public nonresidential spending declined 1.1% from February—the fourth consecutive monthly decrease—and 7.4% over 12 months.
Private nonresidential construction spending fell 0.9% from February to March and 9.1% since March 2020, with year-over-year decreases in all 11 subsegments. The largest private nonresidential category, power construction, retreated 8.3% year-over-year and 0.4% from February to March. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slumped 8.8% year-over-year and 0.5% for the month. Manufacturing construction tumbled 7.8% from a year earlier and 1.3% in March. Office construction decreased 4.2% year-over-year and 0.4% in March.
Public construction spending slumped 4.6% year-over-year and 1.5% for the month. Among the largest segments, highway and street construction declined 10.9% from a year earlier and 2.2% for the month, while educational construction decreased 4.0% year-over-year and 2.0% in March. Spending on transportation facilities declined 0.9% over 12 months but rose 1.8% in March.
Association officials urged Congress and the Biden administration to work together to increase investments in infrastructure. And they continued to call on the President to take steps to address rapidly rising materials prices, including by ending tariffs on key construction materials like steel and lumber. They cautioned that without the new investments and supply chain relief, the industry would have a hard time recovering.
“Federal officials are pushing for an economic recovery while at the same time hanging on to dated policies, like tariffs, that are holding growth back,” said Stephen E. Sandherr, the association’s chief executive officer. “Boosting infrastructure investments and tackling supply chain problems will go a long way in unleashing demand for new construction workers.”
Related Stories
Market Data | May 2, 2017
Nonresidential Spending loses steam after strong start to year
Spending in the segment totaled $708.6 billion on a seasonally adjusted, annualized basis.
Market Data | May 1, 2017
Nonresidential Fixed Investment surges despite sluggish economic in first quarter
Real gross domestic product (GDP) expanded 0.7 percent on a seasonally adjusted annualized rate during the first three months of the year.
Industry Research | Apr 28, 2017
A/E Industry lacks planning, but still spending large on hiring
The average 200-person A/E Firm is spending $200,000 on hiring, and not budgeting at all.
Market Data | Apr 19, 2017
Architecture Billings Index continues to strengthen
Balanced growth results in billings gains in all regions.
Market Data | Apr 13, 2017
2016’s top 10 states for commercial development
Three new states creep into the top 10 while first and second place remain unchanged.
Market Data | Apr 6, 2017
Architecture marketing: 5 tools to measure success
We’ve identified five architecture marketing tools that will help your firm evaluate if it’s on the track to more leads, higher growth, and broader brand visibility.
Market Data | Apr 3, 2017
Public nonresidential construction spending rebounds; overall spending unchanged in February
The segment totaled $701.9 billion on a seasonally adjusted annualized rate for the month, marking the seventh consecutive month in which nonresidential spending sat above the $700 billion threshold.
Market Data | Mar 29, 2017
Contractor confidence ends 2016 down but still in positive territory
Although all three diffusion indices in the survey fell by more than five points they remain well above the threshold of 50, which signals that construction activity will continue to be one of the few significant drivers of economic growth.
Market Data | Mar 24, 2017
These are the most and least innovative states for 2017
Connecticut, Virginia, and Maryland are all in the top 10 most innovative states, but none of them were able to claim the number one spot.
Market Data | Mar 22, 2017
After a strong year, construction industry anxious about Washington’s proposed policy shifts
Impacts on labor and materials costs at issue, according to latest JLL report.