Nonresidential construction spending inched 0.3 percent lower in July largely due to a significant upward revision to June’s spending figure, according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors (ABC). Nonresidential spending totaled $701.4 billion on a seasonally adjusted annualized basis in July, the second highest month since November of 2008, right behind June, which was revised upward from $682 billion to $703.5 billion. Public nonresidential spending continued to falter, declining 3.2 percent for the month and 6.5 percent for the year.
Nonresidential construction spending has been suppressed over the last year or so with the primary factor being the lack of momentum in public spending. “This lack of public investment continues despite obvious deficiencies in water, road and other forms of infrastructure. The fact that all but two of the 12 public nonresidential public subsectors declined in July shows that the malaise is widespread,” says ABC Chief Economist Anirban Basu in a press release.
The second biggest factor deals with tightening commercial real estate standards that may have been brought on by growing regulatory pressures. “There is growing concern that key commercial real estate segments are in the process of being overbuilt, particularly in America’s largest cities, which are most likely to attract significant levels of foreign investment,” Basu says.
All is not negative, however, as the housing sector has begun to improve at a meaningful rate and the country continues to add a substantial number of jobs. Additionally, interest rates remain low.