Construction Spending Posts Solid Monthly and Y-o-Y Increases in March

Construction spending increased by 8 percent in March compared to a year earlier and was also up slightly between February and March. According to analysis by the Associated General Contractors of America, there is growing demand for many types of construction, and the spending total hit the highest level since October 2007. The growth comes amid strong private-sector demand and new federal investments in surface transportation programs, said association officials. Construction spending in March 2016 was $1.138 trillion at a seasonally adjusted annual rate. This was 0.3 percent higher than the revised February total and 8.0 percent higher than in March 2015. Private residential spending increased by 1.6 percent for the month and 8.5 percent compared to 12 months earlier. Spending on multifamily residential construction jumped 5.6 percent for the month and 34.6 percent year-over-year, while single-family spending was flat compared to February but rose 13.4 percent compared to March 2015.

Private nonresidential construction spending increased 0.7 percent for in March and 9.3 percent from a year earlier. Ken Simonson, AGC America's chief economist, observed that all but one segment increased from 12 months before. The largest private non-residential segment in March was manufacturing construction, which rose 2.2 percent for the month but dropped 2.0 percent year-over-year. The next-largest segment, power (including oil and gas pipelines), lost 1.8 percent for the month but gained 2.0 percent for the year.

Public construction spending dipped 1.9 percent from a month before but is still up 6.7 percent from 12 months earlier. The biggest public segment — highway and street construction — was up 0.4 percent for the month but is up 18.8 percent year-over-year, as new federal surface transportation investments enacted last year began to impact demand, Simonson noted.

Association officials said the new construction spending figures reinforce reports that the industry continues to grow amid robust demand for most types of construction services. But labor shortages are likely to become even more severe as construction firms continue to expand unless government officials at all levels take action.

"The new spending data, combined with recent employment reports, make it clear that the construction industry is growing faster than the broader U.S. economy," said Stephen E. Sandherr, the association's CEO. "But unless firms have enough workers to keep pace with demand, construction schedules are likely to slow as firms are forced to cope with labor shortages."