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 | May 2, 2018
Construction employment increases in 245 metro areas between March 2017 & 2018, as trade fights & infrastructure funding shortfalls loom
Houston-The Woodlands-Sugar Land, Texas and Weirton-Steubenville, W.Va.-Ohio experience largest year-over-year gains; Baton Rouge, La. and Auburn-Opelika, Ala. have biggest annual declines.
Market Data | Apr 30, 2018
Outlook mixed for renewable energy installations in Middle East and Africa region
Several major MEA countries are actively supporting the growth of renewable energy.
Market Data | Apr 12, 2018
Construction costs climb in March as wide range of input costs jump
Association officials urge Trump administration, congress to fund infrastructure adequately as better way to stimulate demand than tariffs that impose steep costs on contractors and project owners.
Market Data | Apr 9, 2018
Construction employers add 228,000 jobs over the year despite dip in March
Average hourly earnings increase to $29.43 in construction, topping private sector by nearly 10%; Association officials urge updating and better funding programs to train workers for construction jobs.
Market Data | Apr 4, 2018
Construction employment increases in 257 metro areas between February 2017 & 2018 as construction firms continue to expand amid strong demand
Riverside-San Bernardino-Ontario, Calif. and Merced, Calif. experience largest year-over-year gains; Baton Rouge, La. and Auburn-Opelika, Ala. have biggest annual declines in construction employment.
Market Data | Apr 2, 2018
Construction spending in February inches up from January
Association officials urge federal, state and local officials to work quickly to put recently enacted funding increases to work to improve aging and over-burdened infrastructure, offset public-sector spending drops.
Market Data | Mar 29, 2018
AIA and the University of Minnesota partner to develop Guides for Equitable Practice
The Guides for Equitable Practice will be developed and implemented in three phase.
Market Data | Mar 22, 2018
Architecture billings continue to hold positive in 2018
Billings particularly strong at firms in the West and Midwest regions.
Market Data | Mar 21, 2018
Construction employment increases in 248 metro areas as new metal tariffs threaten future sector job gains
Riverside-San Bernardino-Ontario, Calif., and Merced, Calif., experience largest year-over-year gains; Baton Rouge, La., and Auburn-Opelika, Ala., have biggest annual declines in construction employment.
Market Data | Mar 19, 2018
ABC's Construction Backlog Indicator hits a new high: 2018 poised to be a very strong year for construction spending
CBI is up by 1.36 months, or 16.3%, on a year-over-year basis.
