Nonresidential construction spending contracted 1.6% on a monthly basis in June, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data released today. Spending totaled $742.4 billion on a seasonally adjusted annual rate for the month, a 4.2% increase from the same time one year ago. Private nonresidential spending fell 0.3% in June, while public nonresidential spending contracted by 3.5%.
“The hope is that June’s construction spending setback is merely a statistical aberration,” said ABC Chief Economist Anirban Basu. “That is certainly a possibility given the recent second quarter gross domestic product report, which among other things indicated extraordinarily rapid growth in the construction of structures. Other data, including ABC’s Construction Backlog Indicator, indicate ongoing elevated levels of demand for construction services. Construction employment statistics are also consistent with industry expansion.
“But as tempting as it is to simply relegate June spending data to the back burner, there are other less benign explanations,” said Basu. “One relates to worker productivity. With construction firms suffering grave difficulty finding skilled workers, it may simply be a case of slowed construction service delivery. However, this is not an especially compelling explanation for one month of data. The shortage of human capital is long-lived, and the recent pace of construction hiring has been rapid.
“A more likely explanation is that the recent surge in construction materials prices is resulting in material acquisition delays,” said Basu. “This has the effect of lengthening projects as contractors painstakingly search for the most affordable sources of steel, lumber or other inputs. Since monthly construction spending declines were apparent in both private and public segments, it is also possible that certain projects have been put on hold, with the hope that input prices will eventually decline to lower levels.”
Related Stories
Market Data | Feb 4, 2020
Construction spending dips in December as nonresidential losses offset housing pickup
Homebuilding strengthens but infrastructure and other nonresidential spending fades in recent months, reversing pattern in early 2019.
Market Data | Feb 4, 2020
IMEG Corp. acquires Clark Engineering
Founded in 1938 in Minneapolis, Clark Engineering has an extensive history of public and private project experience.
Market Data | Jan 30, 2020
U.S. economy expands 2.1% in 4th quarter
Investment in structures contracts.
Market Data | Jan 30, 2020
US construction & real estate industry sees a drop of 30.4% in deal activity in December 2019
A total of 48 deals worth $505.11m were announced in December 2019.
Market Data | Jan 29, 2020
Navigant research report finds global wind capacity value is expected to increase tenfold over the next decade
Wind power is being developed in more countries as well as offshore and onshore.
Market Data | Jan 28, 2020
What eight leading economists predict for nonresidential construction in 2020 and 2021
Public safety, education, and healthcare highlight a market that is entering growth-slowdown mode, but no downturn is projected, according to AIA's latest Consensus Construction Forecast panel.
Market Data | Jan 28, 2020
Los Angeles has the largest hotel construction pipeline in the United States
Los Angeles will have a growth rate of 2.5% with 19 new hotels/2,589 rooms opening.
Market Data | Jan 27, 2020
U.S. hotel construction pipeline finishes 2019 trending upward
Projects under construction continue to rise reaching an all-time high of 1,768 projects.
Market Data | Jan 24, 2020
U.S. Green Building Council releases the top 10 states for LEED
Colorado leads the nation, showing how LEED green buildings support climate action and a better quality of life.
Market Data | Jan 23, 2020
Construction contractor confidence surges into 2020, says ABC
Confidence among U.S. construction industry leaders increased in November 2019 with respect to sales, profit margins, and staffing, according to the Associated Builders and Contractors Construction Confidence Index.