Nonresidential construction spending declined 0.3% in March, according to an Associated Builders and Contractors (ABC) analysis of U.S. Census Bureau data recently released. Nonresidential spending, which totaled $740.9 billion on a seasonally adjusted, annualized basis, has expanded 2.5% on a year-over-year basis. February’s spending estimate was revised roughly $10 billion higher, from $732.8 billion to $742.8 billion, rendering the March decline less meaningful.
Private sector nonresidential construction spending fell 0.4% on a monthly basis, but rose 2.2% from a year ago. Public sector nonresidential spending remained unchanged in March, but it is up 2.9% year-over-year.
“The nonresidential construction spending data emerging from the Census Bureau continue to be a bit at odds with other data characterizing growth in the level of activity,” said ABC’s Chief Economist Anirban Basu. “For instance, first quarter GDP data indicated brisk expansion in nonresidential investment. Data from ABC’s Construction Backlog Indicator, the Architecture Billings Index and other leading industry indicators have also been suggesting ongoing growth. Despite that, private nonresidential construction spending is up by roughly the inflation rate, indicating that the volume of services delivered over the past year has not expanded in real terms.
“That said, most economists who follow the industry presumed that March data would be somewhat soft,” said Basu. “The Northeast and Midwest were impacted by unusually persistent storm activity in March. The same phenomenon impacted March’s employment estimates, which indicated that construction actually lost 15,000 jobs that month. Other weather-sensitive industries, including retail trade, also experienced slow to negative job growth in March.
“The upshot is that CEOs and other construction leaders should remain upbeat regarding near-term prospects despite today’s construction spending report,” said Basu. “Leading indicators, including a host of confidence measures, collectively suggest that business investment will be on the rise during the months ahead. Improved state and local government finances should also support additional nonresidential construction activity.
“At the same time, construction industry leaders must remain wary of a sea of emerging risks to the ongoing economic and construction industry expansions,” said Basu. “Interest rates are on the rise. Materials prices, including those associated with softwood lumber, steel and aluminum, are expanding briskly. Wage pressures continue to build. There are also issues related to America’s expanding national debt, increasingly volatile financial markets, geopolitical uncertainty that has helped to propel fuel prices higher, and lack of transparency regarding America’s infrastructure investment intentions. The challenge for construction CEOs and others, therefore, is to prepare for growing activity in the near-term, but for something potentially rather different two to three years from now.”
Related Stories
Market Data | Oct 1, 2021
Nonresidential construction spending dips in August
Spending declined on a monthly basis in 10 of the 16 nonresidential subcategories.
Market Data | Sep 29, 2021
One-third of metro areas lost construction jobs between August 2020 and 2021
Lawrence-Methuen Town-Salem, Mass. and San Diego-Carlsbad, Calif. top lists of metros with year-over-year employment increases.
Market Data | Sep 28, 2021
Design-Build projects should continue to take bigger shares of construction spending pie over next five years
FMI’s new study finds collaboration and creativity are major reasons why owners and AEC firms prefer this delivery method.
Market Data | Sep 22, 2021
Architecture billings continue to increase
The ABI score for August was 55.6, up from July’s score of 54.6.
Market Data | Sep 20, 2021
August construction employment lags pre-pandemic peak in 39 states
The coronavirus delta variant and supply problems hold back recovery.
Market Data | Sep 15, 2021
ABC’s Construction Backlog Indicator plummets in August; Contractor Confidence down
ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels all fell modestly in August.
Market Data | Sep 7, 2021
Construction sheds 3,000 jobs in August
Gains are limited to homebuilding as other contractors struggle to fill both craft and salaried positions.
Market Data | Sep 3, 2021
Construction workforce shortages reach pre-pandemic levels
Coronavirus continues to impact projects and disrupt supply chains.
Multifamily Housing | Sep 1, 2021
Top 10 outdoor amenities at multifamily housing developments for 2021
Fire pits, lounge areas, and covered parking are the most common outdoor amenities at multifamily housing developments, according to new research from Multifamily Design+Construction.
Market Data | Sep 1, 2021
Construction spending posts small increase in July
Coronavirus, soaring costs, and supply disruptions threaten to erase further gains.