by Wolf Richter, Wolf Street:
Office construction wobbles along at much lower levels, amid a glut of vacant offices.
Construction spending – residential and non-residential – in August ticked up to a record $165.5 billion (not seasonally adjusted), according to estimates by the Census Bureau today. Seasonally, construction spending peaks about this time of the year.
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Compared to August 2021, total construction spending was up 8.8%. Compared to August 2019, it spending was up 25.8%. Construction spending is not adjusted for price changes; it reflects the actual amounts spent each month.
The Census Bureau also provides a “seasonally adjusted annual rate” of total construction spending – what the whole year would look like based on the amounts spent in August. This seasonally adjusted annual rate dipped by 0.7% from July, to $1.78 trillion, up 8.5% from a year ago. These seasonally adjusted annual rates generally show up in the headlines. But I’m going to stick with the actual monthly dollars here.
Residential construction – single-family houses and multifamily buildings, plus improvements to residential structures – remained unchanged in August from July, at $86.1 billion.
But this was up 12.2% from August 2021 and by a phenomenal 63.9% from August 2019, following a huge construction boom that caused prices of construction materials to blow out:
Single-family v. multifamily construction: In terms of the seasonally adjusted annual rates of residential construction, the rate of spending on single-family houses fell for the fifth month in a row, as homebuilders trimmed back to deal with their glut of houses in inventory. But multifamily construction ticked up.
But in the multifamily construction segment, the seasonally adjusted annual rate of spending ticked up in August and has been roughly stable at very high levels for the past five months.
Non-residential construction – spanning anything from offices and power plants to highways – rose to a record $79.4 billion in August, edging past the prior record of August 2019. This was up 5.2% from August 2021 and 0.4% from August 2019, which had been the prior record.
Office construction – a small portion of non-residential construction – also ticked up for the month. But this sector has been languishing ever since work-from-home became the big thing in mid-2020, causing vast amounts of vacant office space to show up on the market across the US. It remains unclear why anyone would now plan another office tower, with this kind of office glut all around, but current construction spending largely reflects projects that were planned years ago.