What Is Construction Spending?

Construction spending is an economic indicator that measures spending for new projects such as housing and infrastructure in the United States. The U.S. 澳洲幸运5官方开奖结果体彩网:Department of Commerce's🍨 Census Bureau releases the monthly Value of Construction Put in Place Survey (VIP), which details residential and non-residential construction in the private sector, and state and federal construction spending.

Understanding Construction Spending

The construction spending data provides insight into the economic growth of the U.S. as measured by 澳洲幸运5官方开奖结果体彩网:Gross Domestic Product (GDP). GDP is a metric ܫthat shows the output of an economy by tracking the production of all goods and services.

As GDP increases, this coincides with increased consumer and business spending, including new construction. When an economy is slowing or experiencing negative growth, construction spending declines. The 澳洲幸运5官方开奖结果体彩网:Bureau of Economic Analysis (BEA) uses construction spending data when producing GDP statistics. Other government agencies and construction-related businesses use this data for economic forecasts, market research, and financial decision-making.

Housing Sector

Residential construction, which includes the housing market, represents nearly 50% of total construction spending in the U.S.Housing market strength can be measured by tracking new home construction, which tends to rise wh🧸en consumers feel optimistic about their jobs and economic condition🍃s.

澳洲幸运5官方开奖结果体彩网:Housing starts show the number of new construction projects that have begun in a particular month. Housing start statistics are released near the middle of each month by the U.S. Commerce Department.

Nonresidential Construction Spending

Commercial businesses spend hundreds of billions of dollars per year on construction spending. Whether building a new factory or a hotel chain, a company's expenditures and business investment adds to the total construction spending. Commercial construction adds jobs for contractors, software and technology firms, and the banking industry, which finances the projects through commercial lending facilities.

Public Construction Spending

A significant amount of money can be allocated to the federal government's construction spending. In 2021, President Biden signed the Bipartisan Infrastructure Law, which provides $550 billion for fiscal years 2022 through 2026 in infrastructure investment for roads, mass transit, waterways, and broadband. The legislation allocates $350 billion of the budget for highway programs and bridge investment.

Tracking Construction Spending

For almost 60 years, the U.S. Census Bureau has tracked monthly construction spending through the Value of Construction Put in Place Survey (VIP). The report provides monthly estimates of the total dollar value of construction work in the U.S., whether by the private or public sector and type of construction project.

The Bureau conducts the survey, which covers construction work on new projects and improvements to existing structures♛ in both the private and public sectors. The following data is included in the construction spending figures:

• Cost of labor and materials
• Cost of architectural and engineering work
• Overhead costs, which are management, sales, and marketing costs or those expenses not tied directly to the production or construction of a project
• Interest on loans or debt used to finance construction spending and taxes paid during the project
• Contractor’s profits

Compiled since 1964, data collection and estimation activities begin on the first day after the reference month and continue for about three weeks. Reported data and estimates include activity conducted during the previous calendar month.

Examples of Construction Spending

Residential, nonresidential, and public construction are the three tiers of spending detailed in the U.S. Census Bureau's monthly reports. For residential housing, new housing starts decreased 17.2% in March 2023 from March 2022.

According to a report from the American Institute of Architects (AIA), spending on nonresidential construction increased at the end of 2022, but is expected to level off in 2023 and slow significantly in 2024 due to the serious challenges facing the U.S. economy. Construction contractors remain optimistic and expect infrastructure and public sector funding will continue as private construction slows.

The U.S. Census Bureau's total monthly construction spending report released in April 2023 shows that $1.84 trillion was spent on residential, nonresidential, and public projects in Feb. 2023 and included segments such as:

Residential

• $852 billion for total residential construction spending
• $368 billion for single-unit housing
• $123 billion for multi-family units

Non-Residential

• $22 billion on lodging, which includes hotels
• $97 billion for offices
• $56 billion for healthcare facilities

Public

• $42 billion for transportation
• $85 billion for education
• $10 billion for conservation and development
  

The Bottom Line

Construction spendin𝄹g includes expenses such as labor, materials, and engineering work in the private and public sectors. The U.S. Census Bureau provides a monthly construction spending report that details new projects. Construction spending is used as an economic indicator to help measure the overall health of the economy.