Nonresidential Construction Spending Increases Slightly In September, Says ABC

Washington, DC - National nonresidential construction spending rose 0.5% in September but is down 0.9% on a year-ago basis, according to an Associated Builders and Contractors analysis of data published by the U.S. Census Bureau. On a seasonally adjusted annualized basis, spending totaled $775.6 billion, 2.4% lower than the cyclical peak in April 2019.

Private nonresidential spending fell 0.3% on a monthly basis and is down 5.7% compared to the same time last year, while public nonresidential construction spending expanded 1.5% for the month and is up 6.6% for the year. This comports neatly with the recent employment report and GDP data released earlier, which revealed ongoing growth in outlays for infrastructure but declining investment in structures.

“Construction spending contracted in a number of private segments, including in the commercial and lodging categories,” said ABC Chief Economist Anirban Basu. "While it would be easy to attribute this to a slowing economy and/or growing concerns regarding the saturation of available space in certain private segments, there are also large-scale economic transformations playing a role. Commercial construction spending is down nearly 19%, as traditional retailers continue to contend with the growing presence and capabilities of e-commerce giants, while those in the lodging segment—which dipped in September and is essentially flat year-over-year—are increasingly competing with online platforms such as Airbnb.

“Meanwhile, public construction remains one of the strongest elements of the U.S. economy,” said Basu. “Spending in the water supply category surged nearly 6% in September and is up 20% on a year-over-year basis. Overall, public nonresidential construction is up nearly 7% over the past 12 months as state and local government finances enjoy their best health in more than a decade. While there were some declines on a monthly basis in certain public segments in September, year-over-year spending is up more than 6% in the highway/street category, by nearly 6% in the transportation segment and by nearly 9% in the public safety category.

“Leading indicators, including the Architecture Billings Index, continue to point toward sluggish growth or worse in private construction,” said Basu. “Public construction spending, by contrast, should remain a source of economic expansion during the months ahead, but the looming insolvency of the Highway Trust Fund must be addressed soon for momentum to persist. In September, nine of 16 nonresidential construction segments experienced a decline in spending, and there has been a negative trend in place since April. Accordingly, viewed from a high-level perspective, the outlook for nonresidential construction spending is becoming increasingly uncertain, though available data regarding backlog suggest that the industry will enter 2020 with residual momentum.”

About The Associated Builders And Contractors

Associated Builders and Contractors is a national construction industry trade association representing more than 21,000 members. Founded on the merit shop philosophy, ABC and its 69 chapters help members develop people, win work and deliver that work safely, ethically and profitably for the betterment of the communities in which ABC and its members work. ABC's membership represents all specialties within the U.S. construction industry and is comprised primarily of firms that perform work in the industrial and commercial sectors. To learn more, visit www.abc.org.