Construction spending during March set a record high, according to a report published by the Commerce Department May 3. Construction that started in March was worth an estimated $944.1 billion — the highest level ever.
The previous monthly record was set in December 2003, when construction reached a seasonally adjusted annual rate of $930 billion. The March estimate was 1.5 percent above the revised February estimate of $930 billion, and 7.9 percent above the March 2003 estimate of $875 billion.
According to Kenneth Simonson, chief economist for the Associated General Contractors, the increase in construction was largely due to an escalation in public projects.
“Although the total looks great, it owes more to good weather and soaring costs for materials than to overall strength in the market,” Simonson said.
Two-thirds of the gain came from highway pavement work and single-family housing. Both of these categories are sensitive to the vagaries of winter weather, he continued
Another factor that could have affected increased spending, Simonson said, was the impact of higher prices for steel, wood and petroleum products.
The Census Bureau’s report stated that spending on highway and street construction grew to $66.7 billion, which is 14.2 percent above spending amounts for March 2003. Contracts for office construction projects also steadily increased; however, overall commercial construction contracts were down 2.5 percent from last year.
Private nonresidential construction, at a seasonally adjusted annual rate of $215 billion in March, remained mired in the same $213 billion$218 billion range it has been in for the past 10 months. On a year to date basis, only one major category was up: office construction, which was 3 percent ahead of last year’s first quarter total.
Simonson said he expects the strong construction economy to increase even in nonresidential construction over the next several months. But, he said, this summer may be a period of increased construction “without prosperity” for contractors due to the high costs of steel and other construction products.