National nonresidential construction spending declined 1.8 percent in June, totaling $773.8 billion on a seasonally adjusted annualized basis—a 2.3 percent increase compared to the same time a year ago, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data published today. Public nonresidential spending fell 3.7 percent in June, but is up 6.4 percent year over year, while private nonresidential spending fell 0.3 percent on a monthly basis and is down 0.4 percent from June 2018.
Among the 16 nonresidential construction spending categories tracked by the Census Bureau, seven experienced increases in monthly spending, although only the conservation and development (+3.8 percent) and commercial (+1.3 percent) categories increased by more than 1 percent. While spending in several categories fell for the month, significant decreases in the publicly driven educational (-6.5 percent) and highway and street (-6.3 percent) categories accounted for nearly all of the monthly decline.
“Like the balance of the U.S. economy, nonresidential construction spending appears to be softening, albeit gradually,” said ABC Chief Economist Anirban Basu. “Private nonresidential construction spending has been trending lower for several months, and segments like office and lodging are no longer the drivers of construction spending growth that they had been, likely due to growing concerns about market saturation.”
“While many observers continue to focus on issues such as trade disputes, high levels of corporate debt and asset prices that are susceptible to sharp declines, the U.S. construction industry’s most significant source of uncertainty may be the pending insolvency of the Highway Trust Fund,” said Basu. “That insolvency is now a mere two years away, and if policymakers fail to act expeditiously, state and local policymakers may choose to postpone certain projects given the rising uncertainty of federal funding. The highway/street and transportation categories are especially vulnerable to such dynamics.”