Nonresidential Construction Spending Attains All-time High in January, Says ABC

Key Takeaways

  • Nonresidential construction spending, which totaled a record $806.9 billion on a seasonally adjusted annual basis in January, is a 1.6% increase from December and is up 5.1% on a year-ago basis.
  • Private nonresidential spending rose 0.8% on a monthly basis and is up 0.5% compared to the same time last year. Public nonresidential construction spending also increased, rising 2.6% for the month and 12.3% on a year over year basis.
  • “At this time, it is unclear how coronavirus will affect materials prices. Certain construction components, whether from China or elsewhere, may experience inadequate supply during the weeks ahead, and the more general impact will be decreased input prices due to lower demand. This is likely to be the case for a number of key commodities, including those related to energy.”

Press Release from Associated Builders and Contractors, Inc.

WASHINGTON, March 2—National nonresidential construction spending increased by 1.6% in January and is up 5.1% on a year-ago basis, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, spending totaled a record $806.9 billion in January.

Private nonresidential spending rose 0.8% on a monthly basis and is up 0.5% compared to the same time last year. Public nonresidential construction spending also increased, rising 2.6% for the month and 12.3% on a year over year basis.

“Despite all the focus on the dislocating impacts of the coronavirus, construction—a key element of the U.S. economy—continues to perform,” said ABC Chief Economist Anirban Basu. “For the first time in history, the volume of nonresidential construction spending exceeded $800 billion on an annualized basis and now stands at an all-time high. Both public and private nonresidential construction spending expanded to start 2020, a reflection of the broader economic momentum evident over the last several years. Backlog remains healthy, according to the ABC Construction Backlog Indicator, and with the nation continuing to add jobs, there is more demand for public and private construction and additional funding resources. This is especially apparent in several infrastructure categories, in which spending growth continues to be robust due to healthier state and local government finances.

“That said, there is no question that the coronavirus has significantly compromised both global and national economic momentum over the past two to three weeks,” said Basu. “U.S. manufacturing and shipping segments have begun to soften, with significant reductions in container volume already being reported at several major U.S. ports. While the crisis is expansive enough to potentially drive the economy into recession, the question is whether the crisis is severe enough to countervail current U.S. economic momentum.

“At this time, it is unclear how coronavirus will affect materials prices,” said Basu. “Certain construction components, whether from China or elsewhere, may experience inadequate supply during the weeks ahead, and the more general impact will be decreased input prices due to lower demand. This is likely to be the case for a number of key commodities, including those related to energy.”


Press Release from Associated General Contractors of America

Mild Weather in Many Parts of the Country May Have Boosted Monthly Results; Construction Officials Caution that the Coronavirus May Impact Deliveries of Materials Manufactured in Hard-Hit Countries

Construction spending in January increased 1.8 percent to $1.369 trillion from December and 6.8 percent from January 2019 as all major segments logged gains, according to a new analysis of federal data released today by the Associated General Contractors of America. Association officials cautioned that January results may have been boosted by unusually mild winter weather in much of the nation and that spending in future months could be impacted by uncertainty related to the coronavirus and its potential impacts on the supply chain for construction materials.

“Public spending on infrastructure, along with single-family housing, was exceptionally robust in January,” said Ken Simonson, the association’s chief economist. “While overall economic conditions remain favorable, future construction spending levels may be affected by the growing uncertainties related to the coronavirus and its impact on the supply chain for construction components, especially those manufactured in hard-hit countries.”

Simonson noted that many construction materials, machines and parts are sourced, at least in part, from China and other countries where production and transportation have been disrupted by the virus. He added that, to date, no contractors have reported supply problems that are impacting their projects.

Public construction spending jumped 2.6 percent from December and 12.6 percent from a year earlier. The largest public category, highway and street construction, increased 11.7 percent. Educational construction, the next-largest segment, rose 4.1 percent year-over-year. Public spending on transportation infrastructure—airports, transit, rail and ports—climbed 11.5 percent. Other infrastructure categories posted even larger year-over-year gains: 13.9 percent for sewage and waste disposal, 35.5 percent for water supply and 23.8 percent for conservation and development.

Private residential spending increased 2.1 percent for the month, led by a 2.8 percent increase in single-family homebuilding. Multifamily construction remained flat. Private nonresidential spending increased 0.8 percent for the month and 0.5 percent compared to January 2019. Among the largest private nonresidential segments, power construction (electric power plus oil and gas field and pipeline projects) gained 5.7 percent year-over-year; commercial construction (retail, warehouse and farm structures) declined 5.5 percent; manufacturing construction increased 5.0 percent; and office construction rose 0.4 percent.

Association officials said the new spending data highlights the overall strength of the U.S. economy. But they cautioned that ongoing workforce shortages and the coronavirus’ impact on construction supply chains and the broader economy could undermine short-term demand for construction services. They urged public officials to continue boosting investments in infrastructure and other public works to offset any temporary dip in demand caused by the uncertainties related to the virus.

“Demand for construction is benefitting from the strength of the overall economy and robust public-sector investments in many types of construction projects,” said Stephen E. Sandherr, the association’s chief executive officer. “The best way to keep the economy healthy and stave off any short-term impacts the coronavirus may have is for public officials to continue investing in needed infrastructure and other public works projects.”

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