Nonresidential Construction Spending Slips for Second Consecutive Month

Nonresidential construction spending slipped 1 percent in September but has still managed to expand 4.2 percent on a year-over-year basis, according to the Nov. 1 release from the U.S. Census Bureau. Spending for the month totaled $596.1 billion on a seasonally adjusted, annualized basis while the government slightly revised the August spending figure from $603.7 billion to $601.9 billion.

“September’s drop in nonresidential construction spending is disappointing given the growing momentum in the broader economy and the generally positive signals being sent by industry-specific leading economic indicators,” said Associated Builders and Contractor Chief Economist Anirban Basu. “Based on a combination of these leading indicators—including ABC’s own Construction Backlog Indicator and the Architecture Billings Index—and the anticipated performance of the U.S. economy, nonresidential construction spending should re-establish an upward trajectory on a seasonally adjusted basis going forward.

“With national job creation accelerating recently and interest rates remaining ultra low, one would expect private construction to perform well during the quarters ahead, while growth in publicly funded spending will be much softer,” said Basu. “The industry should be further buoyed by the economy’s two consecutive quarters of respectable economic growth, something the U.S. economy has rarely achieved during the current recovery.”

Only five of 16 nonresidential construction subsectors posted increases in spending in September on a monthly basis.

• Office-related construction spending grew 2.4 percent in September and is up 15.7 percent from the same time one year ago.
• Lodging construction spending is up 4.7 percent on a monthly basis and is up 14.7 percent on a year-over-year basis.
• Conservation and development-related construction spending grew 4.1 percent for the month and is up 31.7 percent on a yearly basis.
• Commercial construction spending gained 1.3 percent for the month and has grown 12.3 percent on a year-over-year basis.
• Spending in the water supply category expanded 1.1 percent on a monthly basis, but is down 1.6 percent for the year.

Spending in 11 nonresidential construction subsectors declined in September.

• Amusement and recreation-related construction spending lost 0.8 percent in September, but is up 0.6 percent from the same time last year.
• Manufacturing-related spending fell 1.3 percent on a monthly basis, but is up 16.4 percent on a year-over-year basis.
• Communication construction spending declined 0.7 percent for the month and is down 12.8 percent from the same time last year.
• Religious spending fell 3.1 percent for the month, but is up 2.6 percent from the same time last year.
• Sewage and waste disposal-related construction spending declined 2.4 percent for the month, but has expanded 1.1 percent on a 12-month basis.
• Healthcare-related construction spending fell 0.9 percent for the month and is down 7.5 percent on a yearly basis.
• Education-related construction spending fell 0.1 percent for the month, but is up 7.1 percent on a year-over-year basis.
• Construction spending in the transportation category fell 1.1 percent on a monthly basis, but has expanded by 1.2 percent on an annual basis.
• Highway and street-related construction spending fell 3.6 percent in September and is down 1.7 percent compared to the same time last year.
• Public safety-related construction spending lost 2.3 percent on a monthly basis and is down 11.1 percent on a year-over-year basis.
• Power construction spending fell 3.1 percent for the month, but is 2 percent higher than at the same time one year ago.