Nonresidential Construction Spending Posts Modest Gains in August

Nonresidential construction spending grew 0.2 percent in August and is up 1.3 percent on an annual basis, according to the Oct. 22 release by the U.S. Census Bureau. August spending totaled $568.6 billion, on a seasonally adjusted, annualized basis.

The most recent monthly nonresidential construction spending data reveal that both public nonresidential construction spending (up 0.3 percent) and privately financed nonresidential construction projects (up 0.1 percent) saw modest gains in August. On a year-over-year basis, private nonresidential construction spending is up 4.3 percent while public nonresidential construction spending fell 1.9 percent.

“Mimicking the national economy, the nonresidential construction segment is associated with both private sector progress and public sector retrenchment,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Many economists agree that were it not for statistical headwinds and related uncertainty, the U.S. economy probably would be expanding faster than 3 percent rather than struggling to achieve 2 percent growth. Similarly, were it not for declines in public construction-dominated categories such as education and a handful of others, nonresidential construction recovery would have been more forceful during the past year.

“Given lingering fiscal uncertainty emanating from the federal government as well as from many states, public construction is unlikely to rally any time soon,” Basu said. “However, private construction is positioned to continue to recover in conjunction with a national economy now in its fifth year of expansion. Much of the strength in the U.S. economy relates to consumer spending. Not coincidentally, construction segments that have been leading the recovery include lodging and commercial.”

Eight of the 16 nonresidential construction subsectors posted increases in spending for the month.
  • Public safety grew by 7.4 percent but has declined 7.6 percent on a year-over-year basis.
  • Amusement and recreation is up 6.9 percent but has fallen 3.9 percent from the same time last year.
  • Conservation and development is up 5.1 percent but has fallen 15.2 percent for the year.
  • Lodging grew by 2.6 percent and is up 26.7 percent on a year-over-year basis.
  • Sewage and waste expanded by 2.3 percent and has grown 3.3 percent for the year. 

Spending in the following six nonresidential construction subsectors was down for August.
  • Religious spending fell 2.2 percent, down 16.9 percent from the same time last year.
  • Educational construction spending fell 1.8 percent and is down 5.2 percent on a yearly basis.
  • Commercial spending declined 1.5 percent but is up 0.9 percent on a year-over-year basis.
  • Health care spending dropped 0.6 percent in August and 5.2 percent on the year.
  • Both power and water supply spending fell 0.2 percent in August, though both are up from the same time last year (9.7 and 8.1 percent, respectively).

Residential construction spending increased 1.3 percent for the month and is up 18.3 percent from the same time last year.  Total construction spending – which encompasses both nonresidential and residential spending – was up 0.6 percent for the month and is up 7.1 percent since August 2012.

“Most economists expect faster recoveries in nonresidential construction spending next year. However, the most recent budget deal only contemplates a federal government that will remain open through Jan. 15 and only raised the federal debt ceiling through Feb. 7,” Basu said. “This means that many developers, financiers and others, are likely to continue to maintain a wait-and-see attitude; a posture that is inconsistent with rapid spending recovery. The hope is that the next budget deal creates a greater level of fiscal transparency, boosting developer and financial confidence in the process.”