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Construction Spending Up Slightly; Highways Also Rise


The U.S. Census Bureau announced that construction spending during November 2019 was estimated at a seasonally adjusted annual rate of $1,324.1 billion, 0.6% (±1.0%) above the revised October estimate of $1,316.8 billion. The November figure is 4.1% (±1.5%) above the November 2018 estimate of $1,271.4 billion. 

During the first 11 months of this year, construction spending amounted to $1,201.6 billion, 0.8 percent (±1.2%) below the $1,211.8 billion for the same period in 2018.

In November, the estimated seasonally adjusted annual rate of public construction spending was $338.6 billion, 0.9% (±1.5%) above the revised October estimate of $335.7 billion. Highway construction was at a seasonally adjusted annual rate of $96.4 billion, 2.2% (±3.9%) above the revised October estimate of $94.3 billion. Educational construction was at a seasonally adjusted annual rate of $83.9 billion, virtually unchanged from (±1.5%) the revised October estimate of $84.0 billion. 

Nonresidential construction was at a seasonally adjusted annual rate of $449.4 billion in November, 1.2% (±0.7%) below the revised October estimate of $454.7 billion.

Spending on private construction was at a seasonally adjusted annual rate of $985.5 billion, 0.4% (±0.7%) above the revised October estimate of $981.1 billion. Residential construction was at a seasonally adjusted annual rate of $536.1 billion in November, 1.9% (±1.3%) above the revised October estimate of $526.3 billion. 

“The single greatest threat to continued growth in the construction industry is the shortage of qualified candidates for firms to hire,” said Stephen E. Sandherr, Associated General Contractors (AGC) of America's chief executive officer. “That is why Congress and the Trump administration must act quickly to boost investments in career and technical education and allow more people with construction skills to legally enter the country.”

“For months, there has been a lull in private nonresidential construction spending,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The lack of spending growth has been apparent in many private segments, including in the lodging and commercial categories. November data extended this trend, with construction spending in the lodging and commercial categories down on a monthly basis.

“Meanwhile, public construction spending has continued to race higher due in large measure to a strong U.S. economy that continues to support state and local government fiscal health,” said Basu. “The low cost of capital associated with today’s environment also makes it advantageous for governments to float bonds to finance infrastructure, helping to propel rapid growth in highway and street construction (up 8% year over year), public safety (11%), and a number of other public categories. The hope is that policymakers in Washington, D.C., will soon address the pending insolvency of the Highway Trust Fund, allowing for public construction momentum to persist.

“There is a growing likelihood that momentum in private nonresidential construction spending will resurface,” said Basu. “The economy’s performance has been far superior to what many economists had anticipated. Contractors remain confident regarding sales prospects over the first half of 2020, according to ABC’s Construction Confidence Index, with construction backlog standing at nearly nine months as of October 2019, according to ABC’s Construction Backlog Indicator. In addition, the labor market has remained stronger than anticipated, creating new jobs and new demand for office, flex, distribution and other forms of space. After sending out recessionary signals during mid-2019, the economy has rebounded despite lingering uncertainty emanating from many sources, including the Middle East. Through it all, the U.S. economy has remained robust, positioning office and other lagging segments to improve during the months ahead.”