Construction Spending Rises in February

Construction Industry Continues to Cut Through Material and Labor Headwinds

Summary

  • Total construction spending rose 0.5% during February. The $1.7 trillion seasonally adjusted and annualized pace of spending reached during the month represents an 11.2% yearly gain. Total spending is now up 13.5% compared to the levels seen in February just before the pandemic.
  • Most of the overall monthly increase occurred in residential spending, which rose 1.1% during the month. New residential development continues to be driven by a historic shortfall of existing homes for sale and robust buyer demand. Sharply higher mortgage rates in recent weeks may take some wind out of residential’s sails in coming months.
  • Nonresidential spending slipped 0.1% in February, giving back some of the robust 1.5% increase registered during January. The Architecture Billings Index edged up to 51.3 during February. The index has now been in expansion territory for 13 straight months, suggesting nonresidential spending will continue to strengthen over the coming year.
  • Public construction spending declined 0.4% during the month. Highway & street, education and transportation spending each fell 1.3%, while water supply, sewage & waste disposal and public safety spending rose solidly.
  • Public sector construction is poised for growth over the next few years. Not only are many state and local governments flush with cash from higher tax receipts and federal pandemic aid, the recently enacted infrastructure bill will be a boon for road, bridge, power and other infrastructure projects. The full impact will not be felt for several years, however, as it will take time for those funds to be distributed.

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