AGC: Nonresidential Construction Outlays Drop in April to Two-Year Low as Public and Private Work Declines Amid Supply-Chain Woes/Soaring Costs

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Nonresidential construction spending in April declined for the fifth-straight month to a two-year low as demand waned for numerous public and private project categories in the face of lengthening production and delivery times for materials, along with fast-rising prices for many items, according to an analysis of new federal construction spending data by the Associated General Contractors of America. Officials with the association urged the President and Congress to boost infrastructure investments, remove tariffs on key materials and take steps to address production and deliver backups for key construction supplies.

“Both public and private nonresidential spending overall continued to shrink in April, despite a pickup in a few spending categories from March,” said Ken Simonson, the association’s chief economist. “Ever-growing delays and uncertainty regarding backlogs and delivery times for key materials, as well as shortages and record prices, are likely to make even more project owners hesitant to commit to new work.”

Construction spending in April totaled $1.52 trillion at a seasonally adjusted annual rate, an increase of 0.2 percent from the pace in March and 9.8 percent higher than the pandemic-depressed rate in April 2020. As has been true for the past several months, the year-over-year gain was limited to residential construction, Simonson noted. That segment climbed 1.0 percent for the month and 29.5 percent year-over-year. Meanwhile, combined private and public nonresidential spending declined 0.5 percent from March — the fifth consecutive monthly decrease — and 3.9 percent over 12 months, to the lowest annual rate since December 2018.

Private nonresidential construction spending fell 0.5 percent from March to April and 4.8 percent since April 2020, with year-over-year decreases in 10 out of 11 subsegments. The largest private nonresidential category, power construction, plunged 7.1 percent year-over-year and 1.8 percent from March to April. Among the other large private nonresidential project types, commercial construction — comprising retail, warehouse and farm structures—retreated 1.3 percent year-over-year despite a gain of 0.4 percent for the month. Manufacturing construction rose 0.6 percent from a year earlier and 0.4 percent from March. Office construction decreased 1.6 percent year-over-year but edged up 0.2 percent in April.

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Public construction spending slipped 2.2 percent year-over-year and 0.6 percent for the month. Among the largest segments, highway and street construction declined 2.7 percent from a year earlier, although spending rose 0.6 percent for the month. Public educational construction decreased 4.0 percent year-over-year and 0.5 percent in April. Spending on transportation facilities fell 1.9 percent over 12 months and 1.2 percent in April.

Association officials cautioned that a recent Commerce Department announcement that it intends to double the current tariff levels on Canadian lumber would further undermine nonresidential construction activity. They said the Biden administration should instead remove tariffs on lumber, steel and aluminum and work to ease production and shipping delays. Boosting infrastructure funding, which leaders of both parties have proposed, will also help, the construction officials added.

“The last thing construction workers need is for the Biden administration to double tariffs on lumber,” said Stephen E. Sandherr, the association’s chief executive officer. “Instead of making it even harder to build, the administration needs to ease supply backups, remove tariffs and pass a bipartisan infrastructure bill.”

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