Construction in the USA: Spending Back at Pre-Crisis Levels

July saw spending in the US construction industry reach levels not seen since before the global financial crisis. After analysing data for construction activity through the month, the Associated General Contractors of America concluded that spending was at its highest level since late 2008.
Based on a seasonally adjusted annual rate, total construction spending in the USA grew 8.2% compared to July 2013 to a level of US$98 billion. Compared to the June total, which has been revised upwards significantly compared to previous estimates, this shows an increase of 1.8%.
The US construction industry also showed year-on-year growth for monthly spending throughout every major construction category. Spending in relation to private residential construction grew by 8% year-on-year and 0.7% compared to the previous month. Non-residential private construction, meanwhile, grew by 2% compared to July of the previous year and 3% compared to June’s figure. Public construction also rose 3% compared to the previous month, and showed year-on-year growth of 2.1%. However, across the first seven months of the year, total public construction is actually down by 0.1% compared to the corresponding seven month period of 2013.
The most major type of private non-residential construction is power infrastructure. This includes construction projects relating to power generation, as well as many forms of construction that relate to natural resource harvesting and transport. Primarily, this latter group include oil and gas fields, and pipelines for the transportation of those same fuels once harvested. Overall, construction for the power industry saw considerable growth. July spending in this area was up 7.5% on June and 29% compared to the same time last year.
Ken Simonson, chief economist for the Associated General Contractors of America, summed up the sector-by-sector figures saying: “The largest private non-residential categories showed robust year-on-year growth, as did both single- and multi-family housing,” said Simonson. “The dominant public segments – highway and educational construction – also did well in July, though their performance has been mixed year-to-date.”
All in all, the Association welcomed this significant spending growth, with Simonson saying; “It is encouraging to see signs of a broad-based recovery in private construction along with a recovery – at least for now – in public construction investment… Private non-residential construction should remain strong through the rest of 2014 and beyond, while residential spending is likely to keep growing, though at a more moderate pace.”
Nonetheless, the Association also suggested that optimism should be tempered by caution. In particular, they pointed out that the labour market in the USA is already tight, and growth in demand for construction projects will put this market under greater pressure.
Furthermore, according to Simonson, “funding is still inadequate for needed public infrastructure improvements.”
Matthew Scott