By Lucia Mutikani
Reuters

WASHINGTON (Reuters) – U.S. construction spending edged up in May despite the Middle East conflict constraining homebuilding.

The Commerce Department’s Census Bureau reported that construction spending rose 0.1% after a downwardly revised 0.3 percent increase in April. Economists polled by Reuters had forecast construction spending gaining 0.1 percent after a previously reported 0.4% increase in April.

Construction spending fell 1.5 percent on a year-over-year basis in May. Spending on private construction projects was unchanged after rising 0.3% in the prior month. Investment in residential construction increased 0.3 percent, reflecting renovations.

Spending on new single-family housing projects dropped 0.1 percent. It tumbled 4.0 percent year-on-year in May.

The U.S.-Israeli war with Iran boosted oil prices, driving up inflation and mortgage rates. The average rate on the popular 30-year fixed-rate mortgage has increased by about 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed.

Spending on multi-family housing units, which account for a small share of the housing market, dipped 0.1 percent in May.

Investment in private nonresidential structures such as power plants and factories declined 0.3 percent in May. Spending on factory construction dropped 1.3 percent, while outlays on power plants eased 0.1 percent, despite a surge in the construction of data centers to support artificial intelligence.

Investment in public construction projects increased 0.5 percent after a similar gain in April. State and local government construction spending rose 0.4 percent in May while outlays on federal government projects jumped 1.3 percent, likely boosted by the building of detention centers as part of an immigration crackdown.

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By Ethan Duran
91ĘÓƵ Newswires

Construction spending across the nation was $2.1 trillion in August, a 0.1 percent decline from July to August, according to an analysis by the Associated General Contractors.

AGC officials earlier this week said the slight decline was due to stalled federally funded construction projects and a slowed investment in housing during a glut in newly completed buildings.

“Although the federal government has announced thousands of project awards in the past three years, most of the money has yet to turn into construction contracts, let alone work under way,” said Ken Simonson, chief economist at AGC, in a statement.

“There is still great potential for infrastructure and power projects, but the timing remains uncertain. Meanwhile, single-family homebuilding should pick up as mortgage rates decline, but multifamily construction is likely to shrink until the current glut of apartments is absorbed,” he added.

The construction spending figure in August was 0.1 percent below the rate in July, but 4.1 percent more than where it was in August 2023, officials noted.

Homebuilding down in August but still up year-over-year

Private residential spending fell 0.3 percent in August, but was up 2.7 percent compared to last year, according to the analysis. Single-family projects fell 1.5 percent that month but saw a slight rise of 0.8 percent year-over-year, the analysis showed.

Multifamily construction fell again for the eighth month in a row, down by 0.4 percent and falling 7.5 percent from August 2023 levels.

Nonresidential spending inching downward, commercial takes a plunge over the year

Private nonresidential spending inched down by 0.1 percent for the month, but gained 3.6 percent year-over-year, the analysis showed. Manufacturing construction saw a 0.2 percent increase for the month. Being the largest segment in nonresidential spending, manufacturing surged 18.1 percent year-over-year.

Commercial construction spending, which includes warehouse, retail and farm projects, fell by 0.4 percent for the month and dropped 14.8 percent compared to last year, the analysis showed.

Power construction had a 0.3 percent decline for the month but rose 7.6 percent year-over-year, officials said.

Public sector a mixed bag

Overall public construction spending was up 0.3 percent for the month, but its top three segments had mixed results, according to the analysis. Highway and street construction increased by 1.1 percent, education construction remained flat and transportation spending fell by 0.2 percent. However, total public construction spending increased 7.8 percent year-over-year.

AGC lobbies federal government on environmental permitting, Buy America measures

AGC officials said the federal government “has done a good job in announcing projects that will receive construction funding.” However, confusion over Buy America requirements and delays with environmental permitting were keeping projects on from starting, officials added. AGC urged the Biden Administration to speed up permit reviews and give federal agencies more flexibility issuing Buy America waivers.

“Construction spending levels would likely be higher if the federal government could get out of its own way and allow projects to move forward,” said Jeffrey D. Shoaf, the association’s chief executive officer, in a statement. “Promising money is good, allowing projects to move forward is even better.”

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A quarterly nationwide construction survey found widespread pessimism for future opportunities.

The Construction Industry Round Table Sentiment Index, produced by consulting and investment banking firm FMI Corp., found “declining sentiment across all economic components, including the overall U.S. economy, the economy where members operate, members’ construction businesses and the nonresidential sector.”

Design and construction sentiment have been hit by “receding opportunities,” particularly in transportation, industrial and public works. Slight improvement was expected in commercial, education and industrial sectors, according to the survey.

, released Aug. 29, queried 130 CEOs in design and construction. The results “are consistent with what (Associated General Contractors) is seeing nationally and in the Pacific Northwest,” said Mike Salsgiver, executive director of .

“Public work — particularly with federally-funded projects — remains steady, though we have work to do to bolster state- and locally-funded projects,” Salsgiver stated in an email. “The private sector has been slowing, but we will see what happens if the Fed moves to reduce interest rates in the fall.”

In the Portland metro area, major infrastructure projects such as the Portland International Airport’s $2.1 billion main terminal expansion and the Bull Run water treatment project, which is also expected to cost about $2.1 billion, have buoyed contractors. Others, including the Interstate Bridge replacement, are moving through the pipeline.

Labor remains a top issue for contractors and designers. Nearly half of CIRT members said they had overrun budgeted labor costs this year, FMI Corp. reported. Looking ahead, 61 percent said they expect the cost of labor to “moderately increase” in the next quarter.

“The major challenge continuing to face construction is availability of trained and skilled labor,” Salsgiver stated. “While the market is shifting broadly, the construction labor pool remains a serious barrier. We didn’t get here overnight and we won’t fix it overnight, but AGC will continue to work with our partners in government, education, organized labor and privately to bend that curve in the right direction.”

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Total construction starts rose 17% in July to a seasonally adjusted annual rate of $1.2 trillion, according to Dodge Construction Network. Nonbuilding starts drove the increase, rising 38%, due to the start of a singular large LNG facility. Residential starts rose 20%, while nonresidential building starts lost 6%.

Year-to-date through July 2023, total construction starts were 7% below that of 2022. Residential and nonresidential starts were down 21% and 7%, respectively; however, nonbuilding starts were up 20% on a year-to-date basis.

For the 12 months ending July 2023, total construction starts were 3% higher than that of 2022. Nonbuilding starts were 21% higher, and nonresidential building starts gained 16%. Conversely, on a 12-month rolling basis, residential starts posted a 17% decline overall.

Nonbuilding

Nonbuilding construction starts surged in July, climbing 38% to a seasonally adjusted annual rate of $440 billion, due mostly to the start of a large LNG facility. Without the mentioned facility included, total nonbuilding starts would have dropped 7%. Environmental public works also rose dramatically, increasing 62% due to the start of a large dock facility. Highway and bridge starts lost 4% in the month. Miscellaneous nonbuilding starts fell 71% following the start of the Buffalo Bills’ new stadium in June.

Year-to-date through July, nonbuilding starts gained 20%. Utility/gas plants rose 23%, and miscellaneous nonbuilding starts were up 37%. Highway and bridge starts gained 14%, along with environmental public works rising 19%.

For the 12 months ending July 2023, total nonbuilding starts were 21% higher than the 12 months ending July 2022. Utility/gas plant and miscellaneous nonbuilding starts rose 9% and 32%, respectively. Highway and bridge starts were up 22%, and environmental public works rose 25% on a 12-month rolling sum basis.

The largest nonbuilding projects to break ground in July were the $12 billion first phase of the Rio Grande LNG facility in Brownsville, Texas; a $2.8 billion concrete dock at the Pearl Harbor Naval Shipyard in Hawaii; and the $813 million first phase of the Bellefield Solar farm and battery facility in California City, California.

Nonresidential

Nonresidential building starts fell 6% in July to a seasonally adjusted annual rate of $334 billion. Commercial starts rose 11% on the back of gains in warehouse and parking starts, offsetting a decline in office and hotel starts. Institutional starts were down 11%, with education, dormitories, and religious the only categories to show an increase. Manufacturing starts dropped 39% in July.

On a year-to-date basis through July, total nonresidential starts were 7% lower than that of 2022. Institutional starts gained 8%, while manufacturing and commercial starts fell 9% and 31%, respectively.

For the 12 months ending July 2023, total nonresidential building starts were 16% higher than that ending July 2022. Manufacturing starts were 24% higher. Institutional starts improved 20%, and commercial starts gained 8%.

The largest nonresidential building projects to break ground in July were the $405 million Envision AESC BMW components manufacturing plant in Florence, South Carolina; the $370 million Wisteria at Warner Center office building in Los Angeles, California; and the $277 million first phase of an airside concourse at Orlando International Airport in Florida.

Residential

Residential building starts rose 20% in July to a seasonally adjusted annual rate of $414 billion. Single family starts gained 2%, while multifamily starts shot 62% higher. On a year-to-date basis through July 2023, total residential starts were down 21%. Single family starts were 25% lower, and multifamily starts were down 14%.

For the 12 months ending in July 2023, residential starts were 17% lower than in 2022. Single family starts were 25% lower, while multifamily starts were down only 0.1% on a rolling 12-month basis.

The largest multifamily structures to break ground in July were the $1 billion Clarkson Square condo and apartment building in New York City; the $365 million Queensbridge Collective residential tower in Charlotte, North Carolina; and the $358 million Oasis Hallandale tower in Hallandale Beach, Florida.

Regionally, total construction starts in July rose in the South Atlantic, South Central and West regions but fell in the Northeast and Midwest.

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By Robert Dalheim
91ĘÓƵ Newswires

Annual expenditures for improvements and repairs to owner-occupied homes are expected to decline at an accelerating rate through the first half of 2024, according to the Leading Indicator of Remodeling Activity (LIRA) released July 20 by the Joint Center for Housing Studies at Harvard University.

The LIRA projects that year-over-year spending on homeowner improvements and maintenance will shrink by 2.7% through the first quarter of next year and by 5.9% through the second quarter, following a slowdown in growth that began in the final quarter of 2022.

“Home remodeling activity continues to face strong headwinds from high interest rates, softening house price appreciation and sluggish home sales,” said Abbe Will, associate project director. “Annual spending on homeowner improvements and repairs is expected to decrease from $486 billion through the second quarter of this year to $457 billion over the coming four quarters.”

“The ongoing reductions in household moves will cause a decline in the remodeling and repair activity that typically occurs around the time of a home sale,” said Carlos Martín, project director. “The magnitude of the impact may be offset if owners who are locked into their current homes with ultra-low mortgage rates continue to renovate to meet changing needs or take advantage of new federal incentives for energy-efficiency retrofits.”

LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry.

Originally developed in 2007, the LIRA was re-benchmarked in April 2016 to a broader market measure based on the biennial American Housing Survey.

In similar news, existing home sales dropped in June, according to the National Association of Realtors. Sales varied throughout each of the four major U.S. regions, with the Northeast seeing gains, the Midwest staying the same, and the South and West reporting declines. All four regions recorded year-over-year sales dips.

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Nonresidential construction spending has fallen for the first time in nearly a year.

National nonresidential construction spending fell 0.2 percent in May to a total of $1.06 trillion, according to U.S. Census Bureau data published on Monday.

An Associated Builders and Contractors’ analysis of the numbers showed spending fell monthly in nine of 16 nonresidential subcategories. Private nonresidential spending fell 0.3% and public nonresidential construction spending increased 0.1% in May, ABC officials said.

May’s spending decline ended an 11-month streak of monthly increases, Anirban Basu, chief economist for ABC, said in a statement.

“While spending is up more than 17% over that span, manufacturing-related construction has accounted for the majority of that increase. Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6% over the past year,” Basu added.

An ABC analysis said contractors were “relatively upbeat” and manufacturing projects and public finance justified the confidence, Basu said, noting however interest rates are high and are likely to rise once again during the rest of the year.

“Contractors remain relatively upbeat, according to ABC’s Construction Confidence Index, and ongoing strength in manufacturing and publicly financed segments justifies that confidence. Unfortunately, conditions may prove challenging in other segments over the next few quarters. Interest rates remain elevated and are likely to rise at least once more over the second half of 2023, exacerbating already tight credit conditions and ultimately limiting construction activity,” Basu added.

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By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — U.S. construction spending fell 0.3 percent in May. Growth in housing, the economy’s standout performer, slowed while activity in areas most directly impacted by the pandemic showed further weakness.

The Commerce Department reported Thursday that the May decline followed a slight 0.1 percent rise in April and left overall construction spending up 7.5 percent from a year ago.

Housing construction, which has been a driving force for the economy during the pandemic, posted a tiny 0.2 percent gain in May as single-family home construction rose 0.8 percent while apartments and other multifamily construction was flat. Over the past year, housing construction is up 28.7 percent with single-family construction up a sizzling 46.1 percent.

Nonresidential construction activity fell 1.1 percent in May with hotel and motel construction and the category that covers shopping centers, two areas heavily affected by the pandemic shutdowns, both falling. Over the past year, nonresidential construction is down 5.8 percent while the hotel and motel category is down 23.2 percent.

Spending on government projects dipped a slight 0.2 percent in May and is down 8.7 percent over the past year, reflecting the squeeze many levels of government have felt from falling tax revenues.

Nancy Vanden Houten, an economist with Oxford Economics, said she believed the big gap between home building and nonresidential construction would start to narrow “as a recovery in private nonresidential investment takes hold as the recovery accelerates.”

She said that supply chain constraints for lumber and other building materials may dampen growth in both residential and nonresidential spending for a time. But she said the recent plunge in lumber prices after a sharp runup in prices should ease cost pressures.

The various changes in May left overall construction spending at a seasonally adjusted annual rate of $1.545 trillion.

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By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — U.S. construction spending rose a moderate 1 percent in December as the number of new homes offset a sustained weakness in nonresidential construction.

The increase followed a 1.1 percent gain in November, the Commerce Department reported on Monday. The strength of last month came from a 3.1 percent jump in spending on residential projects, as the amount of money that went to single-family homes surged by 5.8 percent.

Although home construction is gaining ground, there was a 1.7 percent decline in nonresidential construction, which had declines in hotel and motel construction and in the category that includes shopping centers.

Spending on government projects, which had been hit by falling tax revenues, rose by 0.5 percent in December.

In an age of extraordinarily low interest rates, housing has been a star performer over the past year even as other parts of the economy are ravaged by the COVID-19 pandemic.

Economists believe the sharp split between a strong housing sector and weak nonresidential construction may narrow in the coming year as the country pulls out of the pandemic-induced recession.

“We look for a gradual recovery in private, nonresidential investment as the recovery takes hold while we expect the pace of housing starts to moderate slightly,” said Nancy Vanden Houten, senior economist at Oxford Economics.

She said she expected government construction would continue to be constrained by tight state and local budgets.

Construction totaled $1.49 trillion at a seasonally adjusted annual rate in December, 5.7 percent higher than the level in December 2019. Residential construction was up 20.7 percent over December 2019 with spending on single-family homes rising 23.5 percent while spending on apartment construction was up 17.8 percent.

By contrast, nonresidential construction was down 9.8 percent from December 2019 with hotel and motel construction down 24.6 percent and office building down 3.3 percent.

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By MATT OTT 
AP Business Writer

SILVER SPRING, Md. (AP) — U.S. construction spending jumped 1.3 percent in October, again on the strength of single-family home building.

The October gain follows a downward revision in September to a 0.5 percent decline from a previous estimate of a 0.3 percent gain, the Commerce Department reported Tuesday. August’s number was also revised significantly upward and spending in October was stronger than economists had expected.

Single-family home building has been a consistent bright spot for months as a lack of new homes has pushed builders to ramp up projects. Single-family home construction rose 5.6 percent in October, helping to boost a 2.9 percent increase in total private residential construction for the month.

Nonresidential private construction fell 0.7 percent, with the category that includes hotels and other lodging falling 3.1 percent.

Spending on government construction projects increased 1 percent after generally lagging for months, possibly due to budget restraints by state and local governments as the pandemic wiped out large amounts of tax revenue. Construction of roads, schools and public safety projects all increased.

During the first 10 months of 2020, construction spending is up 4.3 percent over the same period last year.

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(AP)— A look at some of the key business events and economic indicators upcoming this week:

EYE ON CONSTRUCTION

U.S. construction spending has been mostly rising this year after a spring swoon caused by the economic fallout from the pandemic.

Spending fell in March, April and May and has notched gains every month since, including a 0.3% increase in September. Spending on residential construction has been particularly strong as builders move to capitalize on a red hot housing market. Did the trend continue in October? Find out Tuesday, when the Commerce Department issues its latest monthly construction spending data.

Construction spending, monthly percent change, seasonally adjusted:
May -1.3
June 1.0
July 1.1
Aug. 0.8
Sept. 0.3
Oct. (est.) 0.7
Source: FactSet

ECONOMIC SNAPSHOT

The Federal Reserve delivers findings from its latest survey of business conditions around the country Wednesday.

The report, known as the beige book, is based on responses gathered by the Fed’s 12 regional banks and is used by the central bank to help formulate interest rate policy. The last report, which was issued in late October, found that the U.S. economy was growing at a slight to modest pace. It also documented many areas of economic activity hobbled by the pandemic.

ALL ABOUT JOBS

Economists predict hiring in the U.S. increased in November after declining the previous three months.
They expect the Labor Department will report Friday that nonfarm employers added 700,000 jobs in November. That would be an increase from October, when the economy added 638,000 jobs and the national unemployment rate dropped a full percentage point to 6.9%. The pace of hiring has not been robust enough to rapidly absorb the millions of Americans who were thrown out of work by the pandemic recession.

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