ConDig (03-Jul-18). Construction spending clicked 0.4% higher in May compared with the month prior as an upswing in residential and public investment offset a drop in private nonresidential, according to latest Commerce Departments figures.
The uptick pushed spending to a record level of $1.309 trillion, which was 4.5% higher than the same period last year.
The department reported that April’s figure was revised down to 0.9% from what was originally reported as a 1.8% increase and follows a 0.9% fall in March, the first monthly drop since July of 2017.
It comes as public construction spending rose 0.7% in May, private residential spending increased 0.8% and private nonresidential construction spending dipped 0.3%.
On a year-over-year basis, public construction spending rose 4.7%, private residential spending jumped up 6.6% and private nonresidential construction spending edged 1.8% higher.
In the public infrastructure spending sector, highway and street construction increased 5.8% from last year; transportation construction (airports, transit, public rail and ports) surged 9.1%; sewage and waste disposal construction rose 5.6% and water supply increased 9.4%.
The largest public building construction type—educational construction—edged up 0.4% over the year.
Spending on single-family homebuilding increased 8.2% from May last year, while multifamily construction spending climbed 4.2% over that period.
Despite the record levels of spending in the construction sector on the back of a robust economy, industry leaders have warned that rapidly rising materials costs and a deepening shortage of labor could delay some projects and make others financially unviable.
A rise in material costs has been exacerbated follow a decision by President Trump to slap a 25% tariff on imported steel and a 10% duty on foreign aluminum from Canada, Mexico and the European Union on May 31.
Officials from the Associated General Contractors of America (AGC) are urging Congress to pass a new Perkins Act that increases funding for career and technical education.
“Contractors are struggling to be successful in an environment where there aren’t enough workers available to install increasingly expensive construction materials.” said Stephen E. Sandherr, AGC’s chief executive officer.
”Establishing more construction training programs and finding a more effective way to boost domestic steel and aluminum production will help this industry and the economy to continue expanding.”
The producer price index for inputs to construction industries, goods—a measure of all materials used in construction projects including items consumed by contractors, such as diesel fuel— surged 8.8% from May last year to May 2018, the steepest annual increase in nearly seven years. It also jumped 2.2% from April, according to an analysis by the association of Labor Department data.
Last month, AGC warned that construction costs are set to rise further as tariffs on steel and aluminum take effect, with the cost of goods used in construction surging in May at the fastest year-over-year rate since 2011.