Nonresidential construction spending edges up in August

But total amount spent on sector remains down 3.4% for year
Anirban Basu|!!| chief economist of Associated Builders and Contractors|!!| says data shows ‘that the average nonresidential construction firm can expect to remain busy.’

Nationwide spending on nonresidential construction grew by 0.5 percent in August, to $691.8 billion, according to an analysis of Census Bureau date by Associated Builders and Contractors.

While the spending is an improvement from July’s $688.2 billion total, nonresidential spending remains 3.4 percent below its year-ago level and is down 3.8 percent from the cyclical peak attained in May 2017, according to ABC.

ABC said spending levels in August expanded in 10 of the 16 nonresidential construction subsectors. The manufacturing subsector experienced the largest absolute monthly decline (down $2.6 billion) and the greatest year-over-year decline (down $16.1 billion), ABC found.

“There is a disconnect between spending data and other data characterizing the level of activity, including backlog and employment,” said ABC’s chief economist, Anirban Basu. “Collectively, nonresidential construction firms continue to hire, and staffing levels are well ahead of year-ago levels. That is consistent with a busier industry.”

He added that ABC’s Construction Backlog Indicator “also continues to show that the average nonresidential construction firm can expect to remain busy, with a significant amount of future work already under contract. But the spending data show that the industry has actually become somewhat less busy over the past year.”

According to Basu, among the “possible explanations” for the discrepancy is that employers may be replacing a retiring skilled worker with more than one employee, which “is consistent with declining industry productivity measured in terms of output per hour worked.”

He said that another possibility “is that the construction segments that have been expanding in recent years are more labor-intensive than those in which spending has been in decline. Spending declines have been especially noteworthy in several capital-intensive public spending segments, including conservation and development and sewage and waste disposal. By contrast, spending increases over roughly the past three years have been apparent in segments requiring many workers specializing in high-quality finishes, including in the lodging and office categories.”

Categories: Real Estate & Construction