Infrastructure Fuels Construction Spending Growth in January

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AGC of America - LogoConstruction spending in January increased 1.8 percent to $1.369 trillion from December and 6.8 percent from January 2019 as all major segments logged gains, according to a new analysis of federal data released March 2 by the Associated General Contractors of America. Association officials cautioned that January results may have been boosted by unusually mild winter weather in much of the nation and that spending in future months could be impacted by uncertainty related to the coronavirus and its potential impacts on the supply chain for construction materials.

“Public spending on infrastructure, along with single-family housing, was exceptionally robust in January,” said Ken Simonson, the association’s chief economist. “While overall economic conditions remain favorable, future construction spending levels may be affected by the growing uncertainties related to the coronavirus and its impact on the supply chain for construction components, especially those manufactured in hard-hit countries.”

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Simonson noted that many construction materials, machines and parts are sourced, at least in part, from China and other countries where production and transportation have been disrupted by the virus. He added that, to date, no contractors have reported supply problems that are impacting their projects.

Public construction spending jumped 2.6 percent from December and 12.6 percent from a year earlier. The largest public category, highway and street construction, increased 11.7 percent. Educational construction, the next-largest segment, rose 4.1 percent year-over-year. Public spending on transportation infrastructure—airports, transit, rail and ports—climbed 11.5 percent. Other infrastructure categories posted even larger year-over-year gains: 13.9 percent for sewage and waste disposal, 35.5 percent for water supply and 23.8 percent for conservation and development.

Private residential spending increased 2.1 percent for the month, led by a 2.8 percent increase in single-family homebuilding. Multifamily construction remained flat. Private nonresidential spending increased 0.8 percent for the month and 0.5 percent compared to January 2019. Among the largest private nonresidential segments, power construction (electric power plus oil and gas field and pipeline projects) gained 5.7 percent year-over-year; commercial construction (retail, warehouse and farm structures) declined 5.5 percent; manufacturing construction increased 5.0 percent; and office construction rose 0.4 percent.

Association officials said the new spending data highlights the overall strength of the U.S. economy. But they cautioned that ongoing workforce shortages and the coronavirus’ impact on construction supply chains and the broader economy could undermine short-term demand for construction services. They urged public officials to continue boosting investments in infrastructure and other public works to offset any temporary dip in demand caused by the uncertainties related to the virus.

“Demand for construction is benefiting from the strength of the overall economy and robust public-sector investments in many types of construction projects,” said Stephen E. Sandherr, the association’s chief executive officer. “The best way to keep the economy healthy and stave off any short-term impacts the coronavirus may have is for public officials to continue investing in needed infrastructure and other public works projects.”

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