Nonresidential construction spending declined 0.4 percent in August, according to an Associated Builders and Contractors’ (ABC) analysis of U.S. Census Bureau data. On a seasonally adjusted annualized basis, spending totaled $773.8 billion, 0.3 percent higher than in August 2018.
Private nonresidential spending fell 1percent on a monthly basis and is down 2.8 percent compared to the same time last year. Public nonresidential construction expanded 0.4 percent for the month and 4.8 percent for the year.
“Nonresidential construction spending is down nearly 3 percent from its peak in April 2019 due to declines in private construction,” said ABC chief economist Anirban Basu. “Construction spending in the commercial category, which encompasses retail space among other segments, is down nearly 12 percent on a year-over-year basis. Spending related to lodging, including new hotel construction, was down 0.7 percent for the month and is up less than 4 percent year over year. Spending in the power segment also decreased in August and is down 3.5 percent compared to the same time last year.”
“All of this is consistent with a slowing economy, especially as measures such as industrial production and capacity utilization remain stagnant,” said Basu. “While this could be attributed to trade wars and a slowing global economy, construction dynamics are rarely so simple. Another likely explanation is that America’s growing shortage of skilled construction workers has driven up the cost of delivering construction services, even in the context of flat materials prices, resulting in more project owners delaying projects. On the other hand, public construction spending continues to rise.”
“Construction spending on public safety is up 13.5 percent on a year-over-year basis and spending in the sewage/waste disposal category is up nearly 19 percent. State and local governments continue to benefit from an economy that has pushed property tax, sales tax and income tax collections higher. Low borrowing costs also serve as an inducement to leverage revenues with debt, resulting in more infrastructure spending. Given the recent path of interest rates, this dynamic should continue into 2020.”