The construction industry’s fortunes continued to diverge in October, as residential construction expanded again while nonresidential construction remained largely unchanged from a month ago and is down compared to last year, according to an analysis of new federal construction spending data by the Associated General Contractors of America. Association officials said that demand for nonresidential construction is being hit by private sector worries about the coronavirus, tighter state and local budgets and the lack of new federal pandemic relief measures.
“The October spending report shows private nonresidential construction is continuing to slide,” said Ken Simonson, the association’s chief economist. “Public construction spending has fluctuated in recent months but both types of nonresidential spending have fallen significantly from recent peaks this year and appear to be heading even lower.”
Construction spending in October totaled $1.44 trillion at a seasonally adjusted annual rate, an increase of 1.3% from the pace in September and 3.7% higher than in October 2019. But the gains were limited to residential construction, which increased 2.9% for the month and 14.6% year-over-year. Meanwhile, private and public nonresidential spending was virtually unchanged from September and declined 3.7% from a year earlier.
Private nonresidential construction spending declined for the fourth month in a row, slipping 0.7% from September to October, with decreases in nine out of 11 categories. The October total was 8.2% lower than in October 2019. The largest private nonresidential segment, power construction, declined 0.8% for the month. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slid 1.0%, manufacturing construction declined 0.8%, and office construction dipped 0.2%.
Public construction spending increased 1.0% in October and 3.7% year-over-year. The largest public category, highway and street construction, gained 1.6% for the month. Among other large public segments, educational construction increased 1.1% for the month and transportation construction rose 1.0%.
Private residential construction spending increased for the fifth consecutive month, rising 2.9% in October. Single-family homebuilding jumped 5.6% for the month, while multifamily construction spending rose 1.2% and residential improvements spending was flat.
Association officials said demand for nonresidential construction was unlikely to rebound in the near-term without new federal relief measures, putting additional construction careers at risk. These should include new investments in infrastructure, to improve aging roads and bridges, public buildings and water utility networks. Federal officials should refrain from taxing Paycheck Protection Program loans as it would undermine the benefits of that program. And Congress and the administration should work together to enact liability reforms to protect honest firms from frivolous coronavirus lawsuits.
“As long as the coronavirus undermines private sector confidence and public sector budgets, the only way to save good-paying construction careers is through new federal relief measures,” said Stephen E. Sandherr, the association’s chief executive officer. “Fixing the nation’s infrastructure, preserving the benefits of the PPP program and protecting honest employers will give the economy a much-needed short-term boost.”
Related Stories
Industry Research | Jan 23, 2024
Leading economists forecast 4% growth in construction spending for nonresidential buildings in 2024
Spending on nonresidential buildings will see a modest 4% increase in 2024, after increasing by more than 20% last year according to The American Institute of Architects’ latest Consensus Construction Forecast. The pace will slow to just over 1% growth in 2025, a marked difference from the strong performance in 2023.
Construction Costs | Jan 22, 2024
Construction material prices continue to normalize despite ongoing challenges
Gordian’s most recent Quarterly Construction Cost Insights Report for Q4 2023 describes an industry still attempting to recover from the impact of COVID. This was complicated by inflation, weather, and geopolitical factors that resulted in widespread pricing adjustments throughout the construction materials industries.
Hotel Facilities | Jan 22, 2024
U.S. hotel construction is booming, with a record-high 5,964 projects in the pipeline
The hotel construction pipeline hit record project counts at Q4, with the addition of 260 projects and 21,287 rooms over last quarter, according to Lodging Econometrics.
Multifamily Housing | Jan 15, 2024
Multifamily rent growth rate unchanged at 0.3%
The National Multifamily Report by Yardi Matrix highlights the highs and lows of the multifamily market in 2023. Despite strong demand, rent growth remained unchanged at 0.3 percent.
Self-Storage Facilities | Jan 5, 2024
The state of self-storage in early 2024
As the housing market cools down, storage facilities suffer from lower occupancy and falling rates, according to the December 2023 Yardi Matrix National Self Storage Report.
Designers | Dec 25, 2023
Redefining the workplace is a central theme in Gensler’s latest Design Report
The firm identifies eight mega trends that mostly stress human connections.
Contractors | Dec 12, 2023
The average U.S. contractor has 8.5 months worth of construction work in the pipeline, as of November 2023
Associated Builders and Contractors reported today that its Construction Backlog Indicator inched up to 8.5 months in November from 8.4 months in October, according to an ABC member survey conducted Nov. 20 to Dec. 4. The reading is down 0.7 months from November 2022.
Market Data | Nov 27, 2023
Number of employees returning to the office varies significantly by city
While the return-to-the-office trend is felt across the country, the percentage of employees moving back to their offices varies significantly according to geography, according to Eptura’s Q3 Workplace Index.
Market Data | Nov 14, 2023
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of September 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator declined to 8.4 months in October from 9.0 months in September, according to an ABC member survey conducted from Oct. 19 to Nov. 2. The reading is down 0.4 months from October 2022. Backlog now stands at its lowest level since the first quarter of 2022.
Multifamily Housing | Nov 9, 2023
Multifamily project completions forecast to slow starting 2026
Yardi Matrix has released its Q4 2023 Multifamily Supply Forecast, emphasizing a short-term spike and plateau of new construction.