Construction Spending Rises in January as Surge in Multifamily and Nonresidential Projects Outweighs Weakness in Homebuilding

Construction spending increased by 1.3 percent from December to January as gains in apartment construction and most private and public nonresidential project types outweighed a slump in single-family homebuilding, according to an analysis of new government data by the Associated General Contractors. Association officials added that the new spending figures are consistent with reports from contractors in many parts of the country of strong demand for their services.

“The data are consistent with general contractors’ reports that they were busy early in the year and expect to stay that way through 2019,” said Ken Simonson, the association’s chief economist. “These early figures fit with what contractors say they expect for the full year, as the association’s survey in January revealed.”

Construction spending totaled $1.28 trillion in January at a seasonally adjusted annual rate, an increase of 1.3 percent from the December rate and a gain of 0.3 percent compared to January 2018. But the modest year-over-year increase masks a large disparity between homebuilding and most other segments, Simonson said.

Private residential spending slipped 0.3 percent from December to January and 5.6 percent compared to the January 2018 rate. Over the year, single-family construction spending decreased by 7.2 percent, while multifamily construction spending jumped 12.8 percent.

Private nonresidential spending grew 0.8 percent for the month and 2.4 percent compared to January 2018. Among the largest private nonresidential segments, power construction (electric power plus oil and gas field and pipeline projects) gained 2.5 percent year-over-year; commercial construction (retail, warehouse and farm structures) declined 4.7 percent; manufacturing construction increased 3.7 percent; and office construction rose 7.6 percent.

Public construction spending increased 4.9 percent for the month and 8.0 percent compared to the year-earlier month. The largest public category, highway and street construction, increased 12.7 percent. Educational construction, the next-largest segment, rose 8.1 percent year-over-year.

Association officials cautioned, however, that February employment figures released late last week showed a decline in construction employment for the month of 31,000. They warned that the Administration’s recently released proposal to cut funding for many types of federal infrastructure programs could undermine future growth in demand if enacted.

“While 2019 started off strong, the February jobs figures make it clear that federal officials should not take it for granted that the construction sector is immune to infrastructure funding cuts,” said Stephen E. Sandherr, the association’s chief executive officer. “The best way to ensure the sector continues to add high-paying jobs is for Congress to act quickly to boost funding to improve our aging and over-burdened infrastructure systems.”

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