Construction Spending Maintains Strong Rate of Year-Over-Year Growth In November Even As Spending Slips Compared To A Month Earlier
New Figures Show "Divergent" Trends for Residential, Private Residential and Public Construction as Once Fast-Growing Categories Such as Multifamily, Manufacturing and Lodging Construction Have Stalled
Construction spending slipped in November from a month earlier but maintained a strong rate of year-over-year growth in all major categories, according to an analysis by the Associated General Contractors of America. Association officials noted that the new spending data demonstrate a lot of uncertainty within the private sector about the need for new projects while state and local government officials are worried about budget constraints.
"The November data show divergent trends for residential, private nonresidential and public construction," said Ken Simonson, the association's chief economist. "Compared to October levels, spending dipped overall but climbed for homebuilding, school and office construction. Previously fast-growing categories such as multifamily, manufacturing and lodging construction have stalled for the past two to four months. Yet nearly every type of construction has outperformed its 2014 pace through the first 11 months of 2015."
Construction spending in November totaled $1.122 trillion at a seasonally adjusted annual rate, 0.4 percent lower than the October total and 10.5 percent higher than in November 2014, Simonson said. But the November total was only 0.5 percent higher than in August, indicating construction has leveled off recently, he added.
Private residential spending increased 0.3 percent for the month and 10.8 percent over 12 months. Simonson noted that the Census Bureau substantially revised several years of estimates for residential improvements, which had the effect of reducing the reported growth rate for residential spending in recent months. Spending on multifamily residential construction declined 0.7 percent for the month but was 25 percent higher than in November 2014, while single-family spending rose 0.6 percent and 9.3 percent, respectively. Spending on improvements rose 0.1 percent and 8.3 percent, respectively.
Private nonresidential construction spending fell 0.7 percent for the month but rose 13.6 percent over 12 months. Simonson observed that the total had been nearly flat since July. He noted that manufacturing construction, the largest private nonresidential segment, slumped 4.0 percent in the latest month but increased 29 percent year-over-year. In contrast, private office construction increased 1.7 percent and 23 percent, respectively.
Public construction spending sank 1.0 percent from a month before but climbed 6.0 percent from 12 months earlier. Of the two biggest public categories, highway and street construction dropped 1.3 percent for the month but rose 5.6 percent year-over-year, while spending on educational facilities soared 5.0 percent for the month and 15 percent for the year.
Association officials said that the new spending data is consistent with the findings in the Construction Hiring and Business Outlook that AGC of America and Sage will release this Wednesday. "The question we hope to answer is whether demand will continue to grow in 2016 given some of the headwinds our economy is currently facing," said Stephen E. Sandherr, the association's chief executive officer, who invited the media to participate in a media call on Wednesday to learn what is in store for the industry this year.