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 | Jan 23, 2019
Architecture billings slow, but close 2018 with growing demand
AIA’s Architecture Billings Index (ABI) score for December was 50.4 compared to 54.7 in November.
Market Data | Jan 16, 2019
AIA 2019 Consensus Forecast: Nonresidential construction spending to rise 4.4%
The education, public safety, and office sectors will lead the growth areas this year, but AIA's Kermit Baker offers a cautious outlook for 2020.
Market Data | Dec 19, 2018
Brokers look forward to a commercial real estate market that mirrors 2018’s solid results
Respondents to a recent Transwestern poll expect flat to modest growth for rents and investment in offices, MOBs, and industrial buildings.
Market Data | Dec 19, 2018
When it comes to economic clout, New York will far outpace other U.S. metros for decades to come
But San Jose, Calif., is expected to have the best annual growth rate through 2035, according to Oxford Economics’ latest Global Cities report.
Market Data | Dec 19, 2018
Run of positive billings continues at architecture firms
November marked the fourteenth consecutive month of increasing demand for architectural firm services.
Market Data | Dec 5, 2018
ABC predicts construction sector will remain strong in 2019
Job growth, high backlog and healthy infrastructure investment all spell good news for the industry.
Market Data | Dec 4, 2018
Nonresidential spending rises modestly in October
Thirteen out of 16 subsectors are associated with year-over-year increases.
Market Data | Nov 20, 2018
Construction employment rises from October 2017 to October 2018 in 44 states and D.C.
Texas has biggest annual job increase while New Jersey continues losses; Iowa, Florida and California have largest one-month gains as Mississippi and Louisiana trail.
Market Data | Nov 15, 2018
Architecture firm billings continue to slow, but remain positive in October
Southern region reports decline in billings for the first time since June 2012.
Market Data | Nov 14, 2018
A new Joint Center report finds aging Americans less prepared to afford housing
The study foresees a significant segment of seniors struggling to buy or rent on their own or with other people.