AGC: Construction Spending Dips 0.2% in January with Mixed Results for the Month

Total construction spending slipped from December to January amid widespread severe weather, but outlays climbed strongly compared to January 2023, with year-over-year gains in every category, according to an analysis of a new government report via the Associated General Contractors of America. Association officials noted, however, that some construction segments appear to be impacted by broader economic conditions.

“The dip in January is more likely due to bad weather than to weakening demand overall,” said Ken Simonson, the association’s chief economist. “But high financing costs and falling rents are dragging down income-dependent sectors like warehouse and retail construction, while single-family homebuilding and manufacturing remain solid.”

Construction spending, not adjusted for inflation, totaled $2.102 trillion at a seasonally adjusted annual rate in January. That figure is 0.2 percent below the upwardly revised December rate, but 11.7 percent above the January 2023 level.

Spending on private residential construction gained 0.2 percent for the month and 5.2 percent year-over-year. Single-family construction climbed 0.6 percent from December, the ninth-straight increase. Spending on multifamily projects, which has trended down since August, declined 0.4 percent in January.

Spending on private nonresidential construction inched down 0.1 percent in January but rose 15.2 percent from January 2023. The largest segments were mixed. Manufacturing construction rose for the seventh month in a row, by 2.0 percent. Commercial construction slumped 3.3 percent as warehouse, retail, and farm components each declined. Investment in power, oil, and gas projects rose 0.3 percent. Spending on private offices and data centers edged up 0.1 percent, while health care construction fell 0.2 percent.

Construction machines rolling over money

Public construction spending decreased 0.9 percent for the month but jumped 20.1 percent from a year earlier. Spending on segments most exposed to severe weather declined: highway and street construction fell by 2.1 percent in January, sewage and waste disposal by 1.0 percent, water supply spending by 1.4 percent, and conservation and development outlays by 0.9 percent. Public outlays for educational structures declined 0.7 percent, while public spending on transportation facilities rose 1.4 percent.

Association officials urged federal leaders to take steps to accelerate new infrastructure investments. For example, they are calling on the Biden administration to reform its approach to implementing new Buy America, Build America rules to avoid the confusion and delays that are currently holding up projects.

“Federal investments in construction and infrastructure are likely to remain the largest driver of demand as long as private-sector finance costs remain high,” said Stephen E. Sandherr, the association’s chief executive officer. “Eliminating needless confusion and delay in approving federal projects will keep construction demand, and employment, strong for the foreseeable future.”