The U.S. Department of Commerce on April 1 reported that despite another lackluster month for home building, nonresidential construction has risen 11 percent over the past year and was up slightly in February (0.1 percent) on a monthly basis. Of the16 reported nonresidential sectors, 14 showed year-over-year gains, including lodging (44.8 percent), manufacturing (28.1 percent; supported undoubtedly by a weak dollar), and public safety (27.6 percent). The two nonresidential segments generating less spending were religious construction (down 11.8 percent) and water supply construction (off 10 percent; a decline unlikely to persist given the emergence of water shortages in many American communities). The majority of nonresidential subsectors also reported increased spending on a monthly basis.

Overall, total construction spending nationally in February 2008 was $1.122 trillion on a seasonally-adjusted, annualized basis. This represents a 0.3 percent decline from a month earlier and a 3.5 percent retrenchment from year-ago levels. As has been the case in recent months, the decline in construction spending is explained more than fully by America’s faltering residential sector, in which spending declined 18.6 percent over the past twelve months.

According to Associated Builders and Contractors (ABC), the long-predicted decline in nonresidential construction has yet to occur. That said, nonresidential construction spending is now roughly flat, and if credit market issues continue to roil the broader economy, the industry will likely have to deal with stagnant revenues or worse over the next quarter or more as ABC has suggested in prior reports. Given the increasingly difficult lending environment, ABC predicts that the peak of the nonresidential construction cycle is now well behind us, and the data will likely reflect significant reductions in overall construction spending in the year ahead.