Construction Activity Continues to Expand With Uneven Patterns

For the third-straight month, construction spending continued its modest climb, as solid increases in private nonresidential and public construction outweighed a downturn in residential projects, according to an analysis of new Census Bureau data by the Associated General Contractors of America (AGC).

Private nonresidential spending saw a 1.1 percent jump in May and 11 percent spike over 12 months. The largest private segment, power construction—comprising work on oil and gas fields and pipelines, as well as electricity projects—rebounded 4.3 percent from a sharp drop in April and was up 30 percent year-over-year.

Among other major private nonresidential segments, commercial construction—retail, warehouse and farm projects—climbed 6.5 percent over 12 months; manufacturing construction rose 6.7 percent; and office work jumped 23 percent.

Public construction spending rose 1.0 percent for the month and 1.2 percent year-over-year. The largest public segment, highway and street construction, expanded 2.3 percent from a year before. The second-biggest category, educational construction, gained 1.7 percent since May 2013.

Overall, construction put in place totaled $956 billion in May, 0.1 percent above the upwardly revised April total and 6.6 percent higher than in May 2013. For the first five months of 2014, total spending rose 8.2 percent from the January-May 2013 total.

“The May figures show that construction activity continues to expand, but with lots of variability by month and project type,” says Ken Simonson, the association’s chief economist. “These uneven patterns seem likely to continue for the rest of the year.”

Private residential construction spending in May retreated 1.5 percent from April, when homebuilders may have put in extra hours to make up for adverse winter weather in many regions. The May total was 7.5 percent above the May 2013 level, representing an 11 percent increase in single-family spending, 31 percent for multifamily and a 2.4 percent decline in improvements to existing housing.

“The outlook is brightest for multifamily and oil and gas-related projects, including manufacturing.” Says Simonson. “But single-family and office construction, which have done well so far, may fade later this year.”

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