CONSTRUCTION SPENDING: AGC: Private demand drives up total construction spending

Public-sector spending declines 0.2% over 12 months, holds back overall level

Funding News AGC January 03, 2014
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Total construction spending increased between October and November and for the year amid growing private-sector demand, according to an analysis of new Census Bureau data by the Associated General Contractors of America (AGC). Association officials noted, however, that the spending levels were held back by declining public-sector investments for both the month and the year.


“The nonresidential construction spending figures are even more positive than they appear, with most categories now positive year over year,” said Ken Simonson, AGC's chief economist. “The outlook appears favorable for many types of private nonresidential and multifamily construction, but remains flat or negative for public spending.”


Construction put in place totaled $934 billion in November, rising 1.0% since October and up 5.9% since November 2012. Private residential construction spending increased by 1.9% in November and jumped 17% from a year earlier. Private nonresidential spending climbed 2.7% for the month and 1.0% year over year. Public construction spending dropped 1.8% for the month and 0.2% over 12 months.


Over the past 12 months, the biggest jump in construction spending has occurred in new multifamily construction, which rose 0.9% for the month and 36% year-over-year. The lodging sector recorded the second highest annual gain, with spending rising 32.7% for the year and 0.3% for the month. Spending on communications facilities experienced the largest monthly increase, jumping 11.2% in November, although it is still down 10.5% for the year.


The largest private nonresidential category, power construction—which includes oil and gas field and pipeline projects as well as power plants, renewable power and transmission lines—increased by 3.3% in November but is actually down 24.2% for the year. Simonson noted, however, that there was a surge in power construction during the last quarter of 2012 as contractors rushed to finish wind projects before the expected expiration of the wind production tax credit at the end of 2012. Those credits were extended for projects that broke ground by the end of 2013, explaining the more recent surge. “Both the electricity and oil-and-gas components of power construction should do well in 2014,” he added.


Highway and street construction, the largest public category, declined by 0.4% in November but is up 4.6% compared with a year ago, Simonson noted. The next largest public niche, educational construction, increased by 1.1% for the month but was unchanged for the year, he added.


AGC officials noted that the spending figures would have been even better had it not been for the public-sector declines. They urged Congress and the administration to work together in 2014 to pass vital transportation and other infrastructure legislation. “Finding new ways to fund repairs to our aging infrastructure will help the construction industry grow and boost our broader economy,” said Stephen Sandherr, AGC’s chief executive officer.

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