Nonresidential construction spending fell 1.2 percent in March, according to analysis of U.S. Census Bureau data recently released by Associated Builders and Contractors (ABC). Spending in the segment totaled $708.6 billion on a seasonally adjusted, annualized basis, however the decline is less dramatic than it may be perceived to be given that February’s initial estimate of $701.6 billion was upwardly revised to $717 billion, making it the highest level or spending recorded in the data series.
In March, private nonresidential construction spending fell 1.3 percent for the month, but remains up 6.4 percent on a year-ago basis. Public nonresidential spending decreased by 0.9 percent and is down 6.5 percent year over year. Were it not for the manufacturing subsector, where spending has contracted 9.7 percent from the same time last year, overall spending would have increased from February and set a new record high for construction spending.
“There are at least two tales to tell, and neither one of them is particularly uplifting,” said ABC Chief Economist Anirban Basu. “One narrative relates to public spending, which remains soft. Even categories in which one might have expected spending growth have not experienced an increase over past year. For instance, one might have anticipated stepped-up spending in the water supply category given the events in Flint, Mich. But spending in that category is down by roughly 14 percent over the past year. Similarly, one might have predicted spending increases in the highway and street category since the Fixing America’s Surface Transportation Act was passed in December 2015. However, spending in that category is down 2.4 percent on a year-over-year basis.
“Private construction spending has lost momentum as well, perhaps because developers and their financiers are becoming increasingly unnerved by the possibility of mini-bubbles in certain commercial real estate segments,” said Basu. “Many investors may also have adopted a wait-and-see attitude regarding policies coming out of Washington, D.C., including those related to proposed tax reform and infrastructure spending initiatives. Perhaps as a result, office and commercial-related construction spending declined in March. Still, other data suggest lingering momentum in various privately-financed segments, and data from the most recent GDP report indicate that investors continue to invest aggressively in structures. It is for this reason that today’s construction spending release is at least somewhat surprising with respect to private investment in structures. An upward revision to today’s data may be forthcoming.
“Looking ahead, all eyes are on Washington, D.C,” said Basu. “A pro-business agenda remains in the works, but little of it has been implemented thus far. Financial markets continue to express confidence regarding the ultimate execution of significant portions of this agenda, but if it remains bogged down politically, market confidence will wane and private construction spending will continue to be erratic.”
Related Stories
Contractors | Jun 13, 2023
The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of May 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator remained unchanged at 8.9 months in May, according to an ABC member survey conducted May 20 to June 7. The reading is 0.1 months lower than in May 2022. Backlog in the infrastructure category ticked up again and has now returned to May 2022 levels. On a regional basis, backlog increased in every region but the Northeast.
Industry Research | Jun 13, 2023
Two new surveys track how the construction industry, in the U.S. and globally, is navigating market disruption and volatility
The surveys, conducted by XYZ Reality and KPMG International, found greater willingness to embrace technology, workplace diversity, and ESG precepts.
| Jun 5, 2023
Communication is the key to AEC firms’ mental health programs and training
The core of recent awareness efforts—and their greatest challenge—is getting workers to come forward and share stories.
Contractors | May 24, 2023
The average U.S. contractor has 8.9 months worth of construction work in the pipeline, as of April 2023
Contractor backlogs climbed slightly in April, from a seven-month low the previous month, according to Associated Builders and Contractors.
Multifamily Housing | May 23, 2023
One out of three office buildings in largest U.S. cities are suitable for residential conversion
Roughly one in three office buildings in the largest U.S. cities are well suited to be converted to multifamily residential properties, according to a study by global real estate firm Avison Young. Some 6,206 buildings across 10 U.S. cities present viable opportunities for conversion to residential use.
Industry Research | May 22, 2023
2023 High Growth Study shares tips for finding success in uncertain times
Lee Frederiksen, Managing Partner, Hinge, reveals key takeaways from the firm's recent High Growth study.
Multifamily Housing | May 8, 2023
The average multifamily rent was $1,709 in April 2023, up for the second straight month
Despite economic headwinds, the multifamily housing market continues to demonstrate resilience, according to a new Yardi Matrix report.
Market Data | May 2, 2023
Nonresidential construction spending up 0.7% in March 2023 versus previous month
National nonresidential construction spending increased by 0.7% in March, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $997.1 billion for the month.
Hotel Facilities | May 2, 2023
U.S. hotel construction up 9% in the first quarter of 2023, led by Marriott and Hilton
In the latest United States Construction Pipeline Trend Report from Lodging Econometrics (LE), analysts report that construction pipeline projects in the U.S. continue to increase, standing at 5,545 projects/658,207 rooms at the close of Q1 2023. Up 9% by both projects and rooms year-over-year (YOY); project totals at Q1 ‘23 are just 338 projects, or 5.7%, behind the all-time high of 5,883 projects recorded in Q2 2008.
Market Data | May 1, 2023
AEC firm proposal activity rebounds in the first quarter of 2023: PSMJ report
Proposal activity for architecture, engineering and construction (A/E/C) firms increased significantly in the 1st Quarter of 2023, according to PSMJ’s Quarterly Market Forecast (QMF) survey. The predictive measure of the industry’s health rebounded to a net plus/minus index (NPMI) of 32.8 in the first three months of the year.