Dive Brief:
- Spending on data center construction has boomed 28.1% over the past year, reaching a seasonally adjusted annual rate of $50.7 billion in April, according to an analysis by Associated Builders and Contractors.
- Outside of that boom, momentum elsewhere “has been difficult to find,” said Anirban Basu, ABC chief economist. Nonresidential construction spending ticked up just 0.1% month over month in April, according to the ABC report.
- Public projects and data centers accounted for most of the nominal growth, as expenditures on private construction fell for the seventh consecutive month in April, according to the report.
Dive Insight:
The results suggest strong activity around fewer types of projects, mostly data centers but also highway and infrastructure work, said Basu.
“Nonresidential construction spending inched higher in April, but that growth was entirely due to a sizable increase in public sector activity,” said Basu. “Private sector construction momentum has been difficult to find outside of the still-ascendant data center segment.”
Much of that weakness stems from the manufacturing construction sector, said Basu. Spending on manufacturing projects tumbled 1.2% month over month in April and is down 18.4% over the past year. Commercial construction also dropped, down 0.5% in April compared to March, according to the ABC report.
But data centers are still fueling optimism, even as the rest of the market weakens.
“Those data center projects have buoyed the ABC Construction Backlog Indicator and kept ABC members confident about their outlooks, at least on the whole,” said Basu. “While that particular tailwind will persist for some time, rising materials prices and a lack of momentum in many commercial segments may eventually weigh on contractor sentiment.”
Public construction spending increased 0.4% month over month in April and jumped 3.7% higher than a year earlier, according to the data. The largest public category, highway and street construction, increased 0.4% month over month in April and 4% over the past year.
Lawmakers now face a Sept. 30 deadline to renew federal surface transportation funding. Associated General Contractors of America said the step is critical to maintain momentum in highway construction.
“Any lapse in funding these vital projects would force contractors to sideline construction workers and delay purchasing needed equipment and materials,” said AGC CEO Jeffrey Shoaf. “That would be a significant setback for the economy overall.”
The highway and street segment alone accounts for more than a quarter of total public construction spending, AGC reported.
“Highway construction has been a major contributor to total nonresidential spending,” said Ken Simonson, AGC chief economist. “For the past several months, total spending has increased only when there was a rise in year over year highway construction activity.”
