AGC: Construction Spending Slips in June

“Although the initial estimates for spending in June show decreases from May in all major categories, the first half of 2019 as a whole has been positive, aside from single-family construction,” said Ken Simonson, the association’s chief economist. “The initial monthly estimates have mostly been revised upward, making the six-month year-to-date totals a more reliable indicator of underlying trends.”

AGC’s breakdown by sector:

Public construction spending slipped 3.7 percent for the month but jumped 10.1 percent year-to-date. Spending in the first half of 2019 was up sharply for most public infrastructure, with year-to-date increases of 14.5 percent for highway and street construction spending, 7.1 percent for transportation (airports, transit, rail and port) spending, 16.2 percent for sewage and waste disposal, 15.1 percent for water supply and 12.2 percent for conservation and development.

Private nonresidential spending declined 0.3 by percent from May to June but the six-month total was 1.7 percent higher than in January-June 2018. Major private nonresidential categories experienced mixed first-half results. The largest, power construction (comprising electric power generation, transmission and distribution, plus oil and gas fields and pipelines), inched up by 0.3 percent year-to-date. Commercial (retail, warehouse and farm) construction decreased by 9.9 percent. Manufacturing construction posted an 11.6 percent gain. Private office construction spending rose 8.6 percent.

Private residential construction spending declined 0.5 percent for the month and 7.8 percent year-to-date. Single-family homebuilding decreased 7.0 percent in the first six months of the year, while spending on multifamily projects increased 11.5 percent. Spending on residential improvements plunged 13.8 percent year-to-date.

AGC cited worker shortage for declining spending between May and June as contractors struggled to find qualified workers to keep up with demand. In a survey earlier this year, 78 percent of construction firms said they are having a hard time finding enough qualified workers to hire. “As a result, the drop in construction spending in some categories in June likely reflects the fact firms are turning down or delaying projects until they have enough people on hand to do the work,” said AGC.