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Construction Spending Dips Nationwide in July

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Construction spending in July maintained consistent year-over-year growth despite a pullback from the June peak, according to a recent analysis of new federal data recently released by the Associated General Contractors of America. Association officials said they expect the disparity between private and public construction to persist unless Washington acts to fix infrastructure-funding challenges and pass long-delayed measures.

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“The July spending numbers send a very mixed message,” said Ken Simonson, the association’s chief economist. “Construction of new homes, apartments and most private nonresidential structures appears to be driving gains in construction activity even as the public sector continues to drag on broader sector growth.”

Simonson noted that total construction spending declined 0.9% for the month but climbed 9.3% from July 2011 to July 2012 as well as for the first seven months of 2012 combined, compared with the same period in 2011. Private residential spending dropped 1.6% for the month but was 19% higher than in July 2011. Private nonresidential construction slumped 0.9% for the month but grew 12% year-over-year. Public construction slid further, edging down 0.4% in July and 0.7% year-over-year.

The single-family segment rose for the fourth straight month, by 1.5% from June and 19% from July 2011. New multifamily construction climbed 2.8% in July and 45% from a year earlier. The only reason residential spending decreased for the month was an apparent 5.5% drop in improvements, but initial estimates for improvements are often substantially revised, the construction economist noted.

Power and energy construction—the largest private nonresidential type—fell for the fifth month in a row in July, by 1.4% compared with June, but the total still rose 21% from a year ago, thanks in part to oil and gas activity. Simonson said he expected demand for power and energy construction to stabilize and probably expand. He added that he was optimistic that manufacturing construction, which shrank 2.1% for the month but was 17% higher than in July 2011, will resume growing in the coming months.

Public construction, which is dominated by highway and educational construction, remains plagued by budget woes, especially for local governments and school districts, Simonson remarked. He noted that highway and street construction spending inched down 0.3% in July but was up 5.2% over 12 months, while educational construction spending decreased 0.6% and 5.0% respectively. Other public segments dipped 0.2% for the month and 0.8% year-over-year.

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