velera How Credit Union Innovation Can Drive Gen Z Engagement May 2024 Banner

US Construction Spending Sees Unexpected Drop in March

construction

Construction spending in the U.S. declined unexpectedly in March after being unchanged in February.

Data from the Census Bureau released Wednesday (May 1) showed spending at a seasonally adjusted annual rate of $2.083 trillion, 0.2% below the revised February estimate of $2.087 trillion.

A report by Reuters notes the dip was unexpected, as economists polled by the news organization had forecast construction spending increasing 0.3%. Reuters says the dip was likely due to a resurgence in mortgage rates causing a decline in home building.

The Census data showed spending on private construction at a seasonally adjusted annual rate of $1.6 trillion, 0.5% below the revised February estimate, driven by declines in residential and non-residential construction projects.

The estimated seasonally adjusted annual rate of public construction spending for March was $483.1 billion, 0.8% above February, with spending on education and highway projects for the month above their February rates.

Elsewhere in the construction sector, PYMNTS in March spoke with Vivin Hegde, co-founder and managing partner for North America at Zacua Ventures, about the rise of construction tech innovations.

“Five years back, if you talked about construction tech, very few people knew about it,” he said.

“But the reason it’s so important is that construction is the second largest segment in the world. Most of the pressing issues that the world faces today are addressed by construction, and they cannot be solved without the construction space being much more innovative.”

Although there is enormous potential in this sector, Hegde said it still faces challenges, including regulatory fragmentation and the need for wider industry adoption. Helping stakeholders understand the value proposition of innovative solutions and navigating regulatory landscapes are critical aspects of fueling adoption and scaling startups inside the construction ecosystem.

“We use a term called gentle disruption for construction, as in, it’s not coming and breaking everything that exists because that doesn’t tend to go very well in the industry,” Hegde said. “Filling the trust of people and making it very, very easy to adopt is very important for product market fit.”

As PYMNTS wrote last year, among the innovations in this sector are digital technologies designed to help remedy one of the biggest problems in the construction industry: delayed payments.

The construction sector’s days sales outstanding (DSO) comes to 94 days, according to “Under Construction: Improving Payments in the Construction Industry,” a PYMNTS collaboration with Ingo Payments.

“Those payment delays impact general contractors, subcontractors, vendors, workers and customers alike,” PYMNTS wrote. “Because of these cash flow disruptions, contractors and subcontractors must increase their bids, pay out of pocket for materials and use credit cards to cover payments In addition, construction workers miss paychecks, vendors don’t get paid and projects get delayed.”