Both Nonresidential and Residential Spending Retreat from January Levels amid Extreme Winter Weather; Association Posts Inflation Alert to Aid Understanding of Squeeze on Nonresidential Construction Firms
Construction spending slumped in February as unseasonably severe weather hammered the industry and a decline in new projects squeezed nonresidential contractors experiencing rising costs and delivery times, according to an analysis of new federal construction spending data by the Associated General Contractors of America. The association posted a Construction Inflation Alert to inform project owners and government officials about the threat to project completion dates and contractors’ financial health.
“The downturn in February reflects both an unfavorable change from mild January weather and an ongoing decline in new nonresidential projects,” said Ken Simonson, the association’s chief economist. “Unfortunately, it will take more than mild weather to help nonresidential contractors overcome the multiple challenges of falling demand for many project types, steeply rising costs, and lengthening or uncertain delivery times for key materials.”
Construction spending in February totaled $1.52 trillion at a seasonally adjusted annual rate, a decrease of 0.8% from the pace in January. Although the overall total was 5.3% higher than in February 2020, the year-over-year gain was limited to residential construction, Simonson noted. That segment slipped 0.2% for the month but jumped 21% year-over-year. Meanwhile, combined private and public nonresidential spending declined 1.3% from January and 6.1% over 12 months.
Private nonresidential construction spending fell 1.0% from January to February and 9.7% since February 2020, with year-over-year decreases in all 11 subsegments. The largest private nonresidential category, power construction, retreated 9.7% year-over-year and 0.4% from January to February. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slumped 7.1% year-over-year and 1.2% for the month. Manufacturing construction tumbled 10.4% from a year earlier despite a pickup of 0.3% in February. Office construction decreased 5.0% year-over-year and 0.5% in February.
Public construction spending dipped 0.9% year-over-year and 1.7% for the month. Among the largest segments, highway and street construction declined 1.0% from a year earlier and 0.6% for the month, while educational construction decreased 2.3 percent year-over-year and 3.2 percent in February. Spending on transportation facilities declined 2.3 percent over 12 months and 2.5 percent in February.
Association officials said that rising materials prices and unreliable delivery schedules are making it hard for firms to remain profitable as they have difficulty passing raising prices for construction work. They said that proposed new infrastructure projects will help boost demand for many types of construction projects. But they urged Washington officials to also take steps to address supply-chain challenges, including by ending tariffs on key materials like lumber and steel.
“Contractors are having a hard time finding work, and when they do, they are getting squeezed by rapidly rising materials prices,” said Stephen E. Sandherr, the association’s chief executive officer. “New infrastructure investments will certainly help with demand, but the industry also needs Washington to help address supply-chain problems and rising costs.”
Related Stories
Market Data | Mar 22, 2017
After a strong year, construction industry anxious about Washington’s proposed policy shifts
Impacts on labor and materials costs at issue, according to latest JLL report.
Market Data | Mar 22, 2017
Architecture Billings Index rebounds into positive territory
Business conditions projected to solidify moving into the spring and summer.
Market Data | Mar 15, 2017
ABC's Construction Backlog Indicator fell to end 2016
Contractors in each segment surveyed all saw lower backlog during the fourth quarter, with firms in the heavy industrial segment experiencing the largest drop.
Market Data | Feb 28, 2017
Leopardo’s 2017 Construction Economics Report shows year-over-year construction spending increase of 4.2%
The pace of growth was slower than in 2015, however.
Market Data | Feb 23, 2017
Entering 2017, architecture billings slip modestly
Despite minor slowdown in overall billings, commercial/ industrial and institutional sectors post strongest gains in over 12 months.
Market Data | Feb 16, 2017
How does your hospital stack up? Grumman/Butkus Associates 2016 Hospital Benchmarking Survey
Report examines electricity, fossil fuel, water/sewer, and carbon footprint.
Market Data | Feb 1, 2017
Nonresidential spending falters slightly to end 2016
Nonresidential spending decreased from $713.1 billion in November to $708.2 billion in December.
Market Data | Jan 31, 2017
AIA foresees nonres building spending increasing, but at a slower pace than in 2016
Expects another double-digit growth year for office construction, but a more modest uptick for health-related building.
High-rise Construction | Jan 23, 2017
Growth spurt: A record-breaking 128 buildings of 200 meters or taller were completed in 2016
This marks the third consecutive record-breaking year for building completions over 200 meters.
Market Data | Jan 18, 2017
Fraud and risk incidents on the rise for construction, engineering, and infrastructure businesses
Seven of the 10 executives in the sector surveyed in the report said their company fell victim to fraud in the past year.