June 2, 2008 
Despite the continued slump in residential construction, nonresidential construction spending has risen nearly 12 percent over the past year and was up 0.7 percent in April according to the June 2 U.S. Department of Commerce construction spending report. Total nonresidential construction spending achieved another all-time high in April ($678 billion). Private nonresidential construction spending was up 15.4 percent for the year and 1.6 percent compared to March. Estimates are provided on a monthly, seasonally-adjusted basis.
Of the 16 reported nonresidential sectors, 13 produced year-over-year spending gains, with the largest growth in lodging (41.8 percent), public safety (27.4 percent), manufacturing (25.7 percent) and power (22.5 percent). Three nonresidential segments experienced reduced construction spending activity over the past 12 months. These were religious construction (down 7.5 percent), water supply construction (down 7.3 percent) and commercial construction (down 0.2 percent). On a monthly basis, 11 of 16 nonresidential subsectors reported increased spending.
Total construction spending, both nonresidential and residential, was $1.121 trillion in April on a seasonally-adjusted, annualized basis. This represents a 0.4 percent decline from a month earlier and a 3.9 percent fall from April 2007.
What This MeansAccording to Associated Builders and Contractors, despite an economy expanding at less than 1 percent on an annualized basis and sagging consumer and business sentiment, the level of nonresidential construction spending continues to rise. The nonresidential construction sector appears to be a beneficiary of America’s need to adjust to new realities, including higher energy prices and a weaker U.S. dollar. Given the sustained increase in energy prices, construction spending related to power generating facilities will continue to be a source of strength to the industry as America looks to build its capacity to be more fully self-sufficient.
In addition, manufacturing continues to be a source of considerable growth in nonresidential construction spending due to the ongoing surge in export activity, as well as the desire of goods producers to operate more energy-efficient facilities. Manufacturing will also continue to be a source of significant business to the nonresidential construction industry in the quarters ahead. The outlook for other nonresidential construction spending segments is decidedly less clear as economic weakness persists, including the areas of lodging and the office segment.