Private Nonresidential Construction Spending Increased in January

A commercial high-rise building under construction

According to a report from the Associated General Contractors of America (AGC), Arlington, Va., construction spending rallied in January, especially as private nonresidential construction increased for the first time in seven months.

The report added, however, that this spending remains below pre-pandemic levels, and rising material prices and proposed labor law changes may threaten this sector’s continued recovery.

The report noted that many construction firms describe being squeezed by rising material prices (particularly lumber and steel), yet find it difficult to increase what they charge to complete their projects.

“Contractors are getting caught between rising material prices and stagnant bid levels,” said Stephen E. Sandherr, AGC’s CEO.

Total construction spending in January totaled $1.52 trillion, an increase of 1.7% from December and 5.8% higher than January 2020 (prior to the pandemic). Private nonresidential spending rose 0.4% from December to January.

Power construction, the largest private nonresidential segment, fell 10% year-over-year and 0.8% over December. Commercial construction (retail, warehouses and farm structures) dropped 8.3% year-over-year and 1.8% over December. Office construction decreased 4.4% year-over-year and 0.2% in January. Manufacturing construction tumbled 14.7% year-over-year but increased 4.9% from December.

“Despite a modest upturn in January, spending on private nonresidential construction remained at the second-lowest level in more than three years, and was 10% below the January 2020 spending rate,” said Ken Simonson, AGC’s chief economist.

Private residential construction spending increased for the eighth straight month, jumping 21% year-over-year and 2.5% higher than January. Single-family homebuilding in specific jumped 24.2% over January 2020 and 3% over December. Multifamily construction spending increased 16.9% year-over-year and 0.7% over December.

Public construction spending increased 2.9% year-over-year and 1.7% over December. In particular, educational construction increased 0.9% year-over-year, but dipped 0.1% over December.

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