The Building Tradesman Newspaper

Friday, May 12, 2017

Strong '17 first quarter for U.S. construction spending

By The Building Tradesman

Construction spending was at record levels for the second straight month in March and is up 4.9 percent for the first three months of year compared to the same period in 2016, according to an analysis released May 1 by the Associated General Contractors of America. 

AGC officials said many firms are eager to see details of President Trump's  pending infrastructure plan, which should boost construction demand.

"Construction spending totals during the past two months are at the highest levels we have ever seen," said Stephen E. Sandherr, the association's chief executive officer. "If the winter weather hadn't been so mild in much of the country, we would have seen less growth in February and a higher rate of growth in March, but overall demand remains quite robust."

Construction spending in March totaled $1.218 trillion at a seasonally adjusted annual rate, essentially unchanged from the month before. Remarkably, despite the record spending, March was a bit of a down month across most categories, the AGC reported.

Sandherr said that private nonresidential spending declined by 1.3 percent but is  up 6.4 percent year-to-date. The largest private nonresidential segment in March was power construction (including oil and gas pipelines), which fell by 0.6 percent for the month but is up 8.2 percent year-to-date. The next-largest segment, manufacturing, expanded by 0.5 percent for the month but is down 9.8 percent year-to-date. Commercial (retail, warehouse and farm) construction dropped by 3.2 percent in March but climbed 12.7 percent year-to-date. Private office construction decreased by 2.6 percent for the month but grew by 17.7 percent year-to-date.

Private residential construction spending edged up by 1.2 percent between February and March 2017, and was up 7.5 percent year-to-date. Spending on multifamily residential construction increased by 2.0 percent for the month and is up 7.4 percent year-to-date, while single-family spending inched up 0.3 percent from February to March and is up 4.7 percent year-to-date.

Public construction spending declined 0.9 percent from a month before and is now down by 6.5 percent for the first three months of 2017. 

Association officials said that the decline in public construction spending highlights the need for new infrastructure proposals like the one being developed by the Trump administration. They added that many firms are eager for the administration to release details about the new plan. And they said significant new investments in infrastructure will help boost overall economic activity and support greater demand for construction services.

"If Washington officials can find a way to enact significant new infrastructure funding, we are likely to see even higher record levels of construction spending for the foreseeable future," said Sandherr.

The other major tabulator of U.S. construction activity saw a more splendid first quarter of 2017. Dodge Data & Analytics reported on April 21 that new construction starts in March rose 5 percent from the prior month, the third straight monthly gain. 

The Dodge Index for construction activity has risen 22 percent since a weak December.   “The pattern for construction starts in early 2017, with three straight monthly gains, is the reverse of the three straight monthly declines that closed out 2016,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “While the construction start statistics will frequently show an up-and-down pattern, whether month-to-month or quarter-to-quarter, the improved activity in this year’s first quarter provides evidence that the construction expansion is still proceeding."