Construction Spending Dips In May As New Residential Activity Stalls, While Nonresidential Projects Decline For Third Consecutive Month

Total construction spending edged down 0.1 percent in May as spending on new houses and apartments stalled, while public and private nonresidential construction slumped, according to an analysis the Associated General Contractors of America released today of federal spending data. Association officials said the construction industry’s capacity to build projects was being limited by workforce shortages and supply chain problems.

“Contractors say demand remains strong for nonresidential projects but they are having trouble both getting materials on time and hiring enough workers,” said Ken Simonson, the association’s chief economist. “The industry’s unemployment rate was down to 3.8 percent in May, a sign of how scarce experienced workers are.”

Construction spending, not adjusted for inflation, totaled $1.78 trillion at a seasonally adjusted annual rate in May, 0.1 percent below the upwardly revised April rate and 9.7 percent higher than in May 2021. Private nonresidential construction spending declined for the third month in a row, slipping 0.4 percent from April, although the May rate was 3.7 percent higher than in May 2021. Public construction spending decreased for the second-straight month, falling 0.8 percent from April and 2.7 percent from the year-ago rate.

Residential spending rose 0.2 percent for the month but the gains were limited to improvements to owner-occupied housing. New single- and multifamily spending were each virtually unchanged from April.

The downturn in nonresidential construction spending was widespread. Spending on commercial construction – warehouse, retail, and farm projects – declined 0.9 percent. Educational construction spending decreased 0.5 percent. Among the five largest segments, only manufacturing construction increased, by 1.2 percent, as work began or continued on numerous large factory projects.

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