Construction Spending in October Increases as Monthly Increase in Public-Sector Demand Out Paces Drop in Private Non-Residential Construction

Dec. 15, 2014

Monthly Spending Increase Comes as Industry Copes with Growing Shortages of Qualified Craft Workers

Construction spending increased in October amid growing public-sector demand for construction and continued modest growth in residential, according to an analysis by the Associated General Contractors of America. Association officials said the new spending figures underscore the need for measures to increase the supply of qualified construction workers as firms worry about growing labor shortages.

“Today’s data shows that construction growth remains volatile,” said Ken Simonson, the association’s chief economist. “While overall construction spending jumped by more than one percent in October, the gain followed two months of stagnation. Public construction was the fastest-growing segment for the month but the slowest-growing over the past year and for the first 10 months of 2014 combined. Conversely, private nonresidential construction inched down from September to October but has risen at double-digit rates–11 percent–for the combined January through October period. And private residential construction continues to grow very modestly, with multifamily construction taking the lead on an annual basis.”

Construction spending in October totaled $971 billion at a seasonally adjusted annual rate, up 1.1 percent from the September total and 3.3 percent higher than in October 2013, Simonson noted. Private residential spending edged up 1.3 percent from September and 1.9 percent from a year earlier, while private nonresidential spending dropped 1.0 percent for the month but rose 6.4 percent year-over-year. The third component of the total-public construction spending-increased 1.5 percent from September and 2.3 percent from a year ago.

Single-family home construction gained 1.8 percent for the month and 13.2 percent over 12 months, and multifamily increased 1.0 percent from the September level and jumped 27.2 percent from a year earlier. The largest private nonresidential type, power construction-which includes oil and gas fields and pipelines as well as electric power-slumped 1.9 percent in October but rose 0.3 percent from the prior year.

Commercial construction-comprising retail, warehouse and farm projects-decreased 2.6 percent for the month but increased 9.3 percent for the year. Manufacturing construction increased 3.4 percent for the month and 23 percent year-over-year. Among the largest public segments, highway and street construction inched up 1.1 percent for the month and declined 0.1 percent from October 2013. Public education construction inched up 2.2 percent and 6.1 percent, respectively.

“For 2014 as a whole and 2015, private nonresidential spending and multifamily spending should be the strongest segments, followed by single-family construction, with very limited prospects for public construction.”

Association officials said the spending increases come as many firms report growing labor shortages. They urged elected and appointed officials to act on a series of measures the association has identified that will help expand the supply of qualified construction workers. “We need to make sure there are enough workers available to meet growing demand for construction,” said Stephen E. Sandherr, the association’s chief executive officer.