National nonresidential construction spending fell 0.4% in August, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. Nonresidential spending totaled $788.6 billion in August on a seasonally adjusted annualized basis, down 3.0% from August 2020.
Spending declined on a monthly basis in 10 of the 16 nonresidential subcategories, with spending in transportation unchanged for the month. Private nonresidential spending was down 1.0%, while public nonresidential construction spending rose 0.5% in August.
“The nonresidential construction spending data are among the most interesting to monitor as the economy continues to wrestle with COVID-19, supply chain disruptions and rampant uncertainty regarding the direction of federal policymaking,” said ABC Chief Economist Anirban Basu. “First, nonresidential construction spending dynamics are shaped by all of the major forces shaping economic outcomes today, including labor shortages, surging input prices, massive liquidity and wavering confidence.
“Second, despite the many challenges they have faced, contractors continued to express confidence regarding near-term prospects until recently, per ABC’s Construction Confidence Index,” said Basu. “For economists, who have been focused on phenomena such as the growing volatility of asset prices, rising freight costs, ongoing lockdowns in parts of the global economy and still-high infection rates in America, that expression of abundant confidence has been somewhat surprising. Today’s data release reminds us that challenges abound, with the trajectory of the nonresidential segment remaining on a downward trend that has now been in place for many months.
“Third, a growing number of contractors indicate that the combination of increasingly expensive labor and rising materials prices are inducing more project owners to postpone work,” said Basu. “This has manifested itself in a number of ways, including the inability of nonresidential construction spending to achieve growth and a recent decline in backlog, as measured by ABC’s Construction Backlog Indicator. As if this were not enough, a bipartisan infrastructure package that appeared set to pass is now jeopardized by jumbled political dynamics.”