U.S. Construction Spending Rises in September

Total construction spending in the United States rose by 0.3 percent, bolstered by a strong showing in the nonresidential building sector, according to monthly statistics released by the U.S. Commerce Department.

“Net of inflation, or real, investment in private nonresidential structures jumped 12 percent in the third quarter, the eighth straight quarter this investment category has outpaced gross domestic product growth,” says Ken Simonson, chief economist for the Associated General Contractors of America (AGC). “You have to go back to the mid-1950s to find another period when private nonresidential construction was so persistently robust.”

Combined private and public nonresidential construction spending rose 1.8 percent in September and 17 percent over the past 12 months, he continues. “That was nearly enough to overcome the 1.4 percent fall in residential spending for the month and nearly offset the 16 percent residential drop from 12 months ago.”

In the next year, Simonson says he expects investment to slow in some categories, including income producing properties such as office, hotel and retail structures. “But accelerating investment in energy and power projects, plus continued strength in hospital and educational construction, should keep the nonresidential totals up,” he adds.

“My biggest concern is higher costs,” he continues. “Diesel prices, which affect contractors through the use of off-road equipment, construction trucks and fuel surcharges on the deliver of materials, are 25 percent higher than a year ago and seem poised to rise further. Other materials, especially imports, are likely to accelerate as well. And construction wage rates are going up faster for the economy as a whole. But public agencies, from transportation departments to county councils, have failed to budget enough for construction cost escalations and instead are trimming projects.”

More information is available at www.agc.org.