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Public-Sector Investments in Construction Tumbled Compared to the First Four Months of 2016 Even as Private-Sector Construction Demand Increased During the Same Time-Frame

Construction spending retreated in April following unusually large gains in and February and March, according to an analysis of new government data by the Associated General Contractors of America.  Association officials said private construction continues to do well so far in 2017 but under-investment in public infrastructure is holding back the industry and is jeopardizing long-run economic growth.

“Most private construction categories have increased significantly in the first four months of this year compared to the same period in 2016, despite a pullback from March to April,” said Ken Simonson, the association's chief economist. “But spending on public infrastructure for transportation, water and sewer projects has been slumping.”

Construction spending in April totaled $1.219 trillion at a seasonally adjusted annual rate, down 1.4 percent from the March total, which was revised sharply higher from the government’s initial estimate, Simonson said. He added that the year-to-date increase of 5.8 percent for January through April 2017, compared with the same months of 2016, shows overall demand for construction remains healthy.

Private nonresidential spending slipped 0.6 percent for the month but has grown 5.9 percent year-to-date. The largest private nonresidential segment in April was power construction (including oil and gas field and pipeline projects), which fell by 1.4 percent for the month but was up 5.4 percent year-to-date. The next-largest segment, commercial (retail, warehouse and farm) construction, edged down 0.3 percent in April but climbed 13.7 percent year-to-date. Manufacturing construction declined 1.9 percent for the month and 9.4 percent year-to-date. Private office construction increased by 1.7 percent for the month and 18.0 percent year-to-date.

Private residential construction spending declined by 0.7 percent between March and April 2017, and was up 12.4 percent year-to-date.  Spending on multifamily residential construction inched down by 0.2 percent for the month and was up 7.7 percent year-to-date, while single-family spending rose 0.8 percent from March to April and was up 5.2 percent year-to-date.

Public construction spending tumbled 3.7 percent from the prior month and 5.2 percent for the first four months of 2017. The biggest public segment—highway and street construction—also dropped 3.7 percent for the month and decreased 3.2 percent year-to-date. Among other major public infrastructure categories, spending on transportation facilities such as transit and airport construction declined 4.6 percent year-to-date; spending on sewage and waste disposal plummeted 23.5 percent; and spending on water supply fell 10.9 percent.

Association officials urged Congress and the Trump administration to identify new, long-term and sustainable ways to pay to improve and expand aging public infrastructure.  They said a budget proposal released last week by the administration should start a debate about the best way to fund and finance new public works projects.

“It will be increasingly difficult for economy to expand if employers are having to spend more to cope with aging infrastructure instead of on new jobs, new equipment and new innovations,” said Stephen E. Sandherr, the association’s chief executive officer.