Nonresidential Construction Spending Contracts 0.6% in September, Says ABC

National nonresidential construction spending contracted 0.6% in September, according to an Associated Builders and Contractors analysis of data published recently by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $791.2 billion for the month.

Spending was down in 11 of the 16 nonresidential subcategories, with spending in amusement and recreation unchanged for the month. Both private and public nonresidential spending declined 0.6% in September.

“It is not surprising that nonresidential construction spending declined in September,” said ABC Chief Economist Anirban Basu. “Nonresidential construction spending has generally been trending lower for several months and the factors behind this are well known. First, the pandemic has continued, resulting in ongoing global supply chain disarray. That has kept commodity and materials prices higher than they otherwise would be, causing some project owners to pull back on construction starts. Indeed, ABC’s Construction Backlog Indicator has signaled a loss of momentum in nonresidential construction spending.

“Second, many observers thought that America would have passed a meaningful infrastructure package by now,” said Basu. “That has not yet happened, and many state transportation agencies, along with their local counterparts, note that planning for projects has become extraordinarily challenging in the context of uncertain federal funding.

“Finally, to the extent that projects are moving forward, construction skills shortages are slowing the pace of construction delivery,” said Basu. “Were an infrastructure package to pass, it is unclear how projects would be sufficiently staffed given a higher rate of retirement among construction workers and a lack of entry into the skilled trades. These factors have continued in recent weeks, suggesting that nonresidential construction spending may remain somewhat soft during the months ahead.”