ConDig (04-Sept-18).  US construction expenditure nudged up 0.1% in July, driven by an uptick in homebuilding and the publicly funded building of schools and highways, according to latest Commerce Department figures.

The slight increase pushed total construction spending to a seasonally-adjusted annual rate of $1.32 trillion, up 5.8% on a year ago.

It comes as homebuilding rose 0.6% in July and public construction increased 0.7%, which included a 2.1% jump in the building of schools and a 0.4% jump in constructing highways and streets.

These increases were slightly offset by nonresidential construction, which includes offices, stores, factories and other buildings, falling 0.3% in July.

The figures continue to underline the relative strength of the construction sector, which is benefiting from the 4.2% growth in the US economy in the second quarter — nearly doubling the growth rate for gross domestic product during the first three months of the year.

But 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.

“It is striking how balanced the growth in construction spending has been so far this year,” said Ken Simonson, chief economist at the Associated General Contractors of America.

“Spending totals for the first seven months of 2018 combined nearly match those for the same period of 2017. Contractors are optimistic that demand for projects will continue but many report that workforce shortages are leading to longer construction schedules and higher costs.”

Spending year-to-date through the first seven months of this year was 5.4% higher than in January through July 2017 for public construction and 5.2% for private construction, Simonson noted. Within private construction, there were increases of 7.7% for residential projects and 2.2% for nonresidential.

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.

Meanwhile, the Associated General Contractors of America reported last week that well over two thirds of contractors are struggling to secure craft workers as a deepening skills shortage raises costs for companies across the construction industry.