The construction industry’s fortunes continued to diverge in October, as residential construction expanded again while nonresidential construction remained largely unchanged from a month ago and is down compared to last year, according to an analysis of new federal construction spending data by the Associated General Contractors of America. Association officials said that demand for nonresidential construction is being hit by private sector worries about the coronavirus, tighter state and local budgets and the lack of new federal pandemic relief measures.
“The October spending report shows private nonresidential construction is continuing to slide,” said Ken Simonson, the association’s chief economist. “Public construction spending has fluctuated in recent months but both types of nonresidential spending have fallen significantly from recent peaks this year and appear to be heading even lower.”
Construction spending in October totaled $1.44 trillion at a seasonally adjusted annual rate, an increase of 1.3% from the pace in September and 3.7% higher than in October 2019. But the gains were limited to residential construction, which increased 2.9% for the month and 14.6% year-over-year. Meanwhile, private and public nonresidential spending was virtually unchanged from September and declined 3.7% from a year earlier.
Private nonresidential construction spending declined for the fourth month in a row, slipping 0.7% from September to October, with decreases in nine out of 11 categories. The October total was 8.2% lower than in October 2019. The largest private nonresidential segment, power construction, declined 0.8% for the month. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slid 1.0%, manufacturing construction declined 0.8%, and office construction dipped 0.2%.
Public construction spending increased 1.0% in October and 3.7% year-over-year. The largest public category, highway and street construction, gained 1.6% for the month. Among other large public segments, educational construction increased 1.1% for the month and transportation construction rose 1.0%.
Private residential construction spending increased for the fifth consecutive month, rising 2.9% in October. Single-family homebuilding jumped 5.6% for the month, while multifamily construction spending rose 1.2% and residential improvements spending was flat.
Association officials said demand for nonresidential construction was unlikely to rebound in the near-term without new federal relief measures, putting additional construction careers at risk. These should include new investments in infrastructure, to improve aging roads and bridges, public buildings and water utility networks. Federal officials should refrain from taxing Paycheck Protection Program loans as it would undermine the benefits of that program. And Congress and the administration should work together to enact liability reforms to protect honest firms from frivolous coronavirus lawsuits.
“As long as the coronavirus undermines private sector confidence and public sector budgets, the only way to save good-paying construction careers is through new federal relief measures,” said Stephen E. Sandherr, the association’s chief executive officer. “Fixing the nation’s infrastructure, preserving the benefits of the PPP program and protecting honest employers will give the economy a much-needed short-term boost.”
Related Stories
Market Data | Apr 3, 2020
COVID-19 cuts nonresidential construction employment in March
The construction unemployment rate was 6.9% in March, up 1.7 percentage points from the same time one year ago.
Market Data | Apr 1, 2020
February’s construction spending decline indicates what’s to come
Private nonresidential spending declined 2% on a monthly basis and is down 0.7% compared to February 2019.
Market Data | Mar 26, 2020
Architects taking action to support COVID-19 response
New AIA task force will offer insights for adapting buildings into healthcare facilities.
Market Data | Mar 26, 2020
Senate coronavirus relief bill's tax and lending provisions will help construction firms, but industry needs additional measures
Construction officials say measure will help firms cope with immediate cash flow crunch, but industry needs compensation for losses.
Market Data | Mar 25, 2020
Engineering and construction materials prices fall for first time in 40 months on coronavirus impacts, IHS Markit says
Survey respondents reported falling prices for five out of the 12 components within the materials and equipment sub-index.
Market Data | Mar 23, 2020
Coronavirus will reshape UAE construction
The impact of the virus has been felt in the UAE, where precautionary measures have been implemented to combat the spread of the virus through social distancing.
Coronavirus | Mar 20, 2020
Pandemic has halted or delayed projects for 28% of contractors
Coronavirus-caused slowdown contrasts with January figures showing a majority of metro areas added construction jobs; Officials note New infrastructure funding and paid family leave fixes are needed.
Market Data | Mar 17, 2020
Construction spending to grow modestly in 2020, predicts JLL’s annual outlook
But the coronavirus has made economic forecasting perilous.
Market Data | Mar 16, 2020
Grumman/Butkus Associates publishes 2019 edition of Hospital Benchmarking Survey
Report examines electricity, fossil fuel, water/sewer, and carbon footprint.