Nonresidential construction spending fell 1.2 percent in March, according to analysis of U.S. Census Bureau data recently released by Associated Builders and Contractors (ABC). Spending in the segment totaled $708.6 billion on a seasonally adjusted, annualized basis, however the decline is less dramatic than it may be perceived to be given that February’s initial estimate of $701.6 billion was upwardly revised to $717 billion, making it the highest level or spending recorded in the data series.
In March, private nonresidential construction spending fell 1.3 percent for the month, but remains up 6.4 percent on a year-ago basis. Public nonresidential spending decreased by 0.9 percent and is down 6.5 percent year over year. Were it not for the manufacturing subsector, where spending has contracted 9.7 percent from the same time last year, overall spending would have increased from February and set a new record high for construction spending.
“There are at least two tales to tell, and neither one of them is particularly uplifting,” said ABC Chief Economist Anirban Basu. “One narrative relates to public spending, which remains soft. Even categories in which one might have expected spending growth have not experienced an increase over past year. For instance, one might have anticipated stepped-up spending in the water supply category given the events in Flint, Mich. But spending in that category is down by roughly 14 percent over the past year. Similarly, one might have predicted spending increases in the highway and street category since the Fixing America’s Surface Transportation Act was passed in December 2015. However, spending in that category is down 2.4 percent on a year-over-year basis.
“Private construction spending has lost momentum as well, perhaps because developers and their financiers are becoming increasingly unnerved by the possibility of mini-bubbles in certain commercial real estate segments,” said Basu. “Many investors may also have adopted a wait-and-see attitude regarding policies coming out of Washington, D.C., including those related to proposed tax reform and infrastructure spending initiatives. Perhaps as a result, office and commercial-related construction spending declined in March. Still, other data suggest lingering momentum in various privately-financed segments, and data from the most recent GDP report indicate that investors continue to invest aggressively in structures. It is for this reason that today’s construction spending release is at least somewhat surprising with respect to private investment in structures. An upward revision to today’s data may be forthcoming.
“Looking ahead, all eyes are on Washington, D.C,” said Basu. “A pro-business agenda remains in the works, but little of it has been implemented thus far. Financial markets continue to express confidence regarding the ultimate execution of significant portions of this agenda, but if it remains bogged down politically, market confidence will wane and private construction spending will continue to be erratic.”
Related Stories
Market Data | Oct 30, 2018
Construction projects planned and ongoing by world’s megacities valued at $4.2trn
The report states that Dubai tops the list with total project values amounting to US$374.2bn.
Market Data | Oct 26, 2018
Nonresidential fixed investment returns to earth in Q3
Despite the broader economic growth, fixed investment inched 0.3% lower in the third quarter.
Market Data | Oct 24, 2018
Architecture firm billings slow but remain positive in September
Billings growth slows but is stable across sectors.
Market Data | Oct 19, 2018
New York’s five-year construction spending boom could be slowing over the next two years
Nonresidential building could still add more than 90 million sf through 2020.
Market Data | Oct 8, 2018
Global construction set to rise to US$12.9 trillion by 2022, driven by Asia Pacific, Africa and the Middle East
The pace of global construction growth is set to improve slightly to 3.7% between 2019 and 2020.
Market Data | Sep 25, 2018
Contractors remain upbeat in Q2, according to ABC’s latest Construction Confidence Index
More than three in four construction firms expect that sales will continue to rise over the next six months, while three in five expect higher profit margins.
Market Data | Sep 24, 2018
Hotel construction pipeline reaches record highs
There are 5,988 projects/1,133,017 rooms currently under construction worldwide.
Market Data | Sep 21, 2018
JLL fit out report portrays a hot but tenant-favorable office market
This year’s analysis draws from 2,800 projects.
Market Data | Sep 21, 2018
Mid-year forecast: No end in sight for growth cycle
The AIA Consensus Construction Forecast is projecting 4.7% growth in nonresidential construction spending in 2018.
Market Data | Sep 19, 2018
August architecture firm billings rebound as building investment spurt continues
Southern region, multifamily residential sector lead growth.