A small increase in total construction spending in September masked a widening gap between declines in most nonresidential segments and robust gains in residential construction, according to an analysis by the Associated General Contractors of America of government data released today. Association officials warned nonresidential construction is headed for an even steeper slump unless officials in Washington enact relief promptly, noting that their latest industry survey found three out of four respondents had experienced a postponed or cancelled project since the start of the pandemic.
“The September spending report shows the gulf between housing and nonresidential markets is growing steadily wider,” said Ken Simonson, the association’s chief economist. “In our October survey, 75% of respondents reported a postponed or cancelled project, up from 60% in August and 32% in June.”
Construction spending in September totaled $1.41 trillion at a seasonally adjusted annual rate, an increase of 0.3% from the pace in August and 1.5% higher than in September 2019. Private and public nonresidential spending slumped by a combined 1.6% since August and 4.4% from a year earlier, while private residential spending climbed by 2.8% for the month and 9.9% year-over-year.
Private nonresidential construction spending declined for the third consecutive month, falling 1.5% from August to September, with decreases in nine out of 11 categories. The largest private nonresidential segment, power construction, declined 2.2% for the month. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slid 1.9%, manufacturing construction declined 2.1%, and office construction rose 0.3%. Simonson noted that the office figure was likely inflated by inclusion of data centers, a segment that appears to have held up well.
Public construction spending fell 1.7% in September, the fourth monthly decline in a row. The largest public category, highway and street construction, tumbled 5.4% for the month. Among other large public segments, educational construction increased 2.0% for the month, while transportation construction dipped 0.3%.
Private residential construction spending increased for the fourth-straight month, rising 2.8% in September. Single-family homebuilding soared 5.7% for the month, while multifamily construction spending rose 1.2% and residential improvements declined 0.4%.
Association officials noted that the coronavirus was having a significant, negative impact on most commercial construction firms. In addition to widespread project delays and cancellations, the association’s recent survey found most contractors do not expect to expand their headcount during the next 12 months because of the pandemic. Many contractors report they are looking to Washington to enact new infrastructure investments and liability reforms to offset the ongoing impacts of the coronavirus.
“The pandemic is suppressing demand for new office buildings, hotels and shopping centers even while it inspires many people to build bigger homes,” said Stephen E. Sandherr, the association’s chief executive officer. “Without new federal investments in infrastructure and other needed relief measures, commercial firms will have a hard time retaining staff or investing in new equipment and supplies.”
Related Stories
Market Data | Aug 16, 2019
Students say unclean restrooms impact their perception of the school
The findings are part of Bradley Corporation’s Healthy Hand Washing Survey.
Market Data | Aug 12, 2019
Mid-year economic outlook for nonresidential construction: Expansion continues, but vulnerabilities pile up
Emerging weakness in business investment has been hinting at softening outlays.
Market Data | Aug 7, 2019
National office vacancy holds steady at 9.7% in slowing but disciplined market
Average asking rental rate posts 4.2% annual growth.
Market Data | Aug 1, 2019
Nonresidential construction spending slows in June, remains elevated
Among the 16 nonresidential construction spending categories tracked by the Census Bureau, seven experienced increases in monthly spending.
Market Data | Jul 31, 2019
For the second quarter of 2019, the U.S. hotel construction pipeline continued its year-over-year growth spurt
The growth spurt continued even as business investment declined for the first time since 2016.
Market Data | Jul 23, 2019
Despite signals of impending declines, continued growth in nonresidential construction is expected through 2020
AIA’s latest Consensus Construction Forecast predicts growth.
Market Data | Jul 20, 2019
Construction costs continued to rise in second quarter
Labor availability is a big factor in that inflation, according to Rider Levett Bucknall report.
Market Data | Jul 18, 2019
Construction contractors remain confident as summer begins
Contractors were slightly less upbeat regarding profit margins and staffing levels compared to April.
Market Data | Jul 17, 2019
Design services demand stalled in June
Project inquiry gains hit a 10-year low.
Market Data | Jul 16, 2019
ABC’s Construction Backlog Indicator increases modestly in May
The Construction Backlog Indicator expanded to 8.9 months in May 2019.