Key Takeaways

• National nonresidential construction spending decreased by 0.2% in May.
• On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion for the month.
• "Contractors remain relatively upbeat, according to ABC’s Construction Confidence Index, and ongoing strength in manufacturing and publicly financed segments justifies that confidence."

Press Release from Associated Builders and Contractors: Nonresidential Construction Spending Decreases in May, First Time in Nearly a Year, Says ABC

WASHINGTON, July 3—National nonresidential construction spending decreased 0.2% in May, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.

Spending declined on a monthly basis in nine of the 16 nonresidential subcategories. Private nonresidential spending fell 0.3%, while public nonresidential construction spending increased 0.1% in May.

"Nonresidential construction spending declined in May, ending a streak of 11 consecutive monthly increases,” said ABC Chief Economist Anirban Basu. “While spending is up more than 17% over that span, manufacturing-related construction has accounted for the majority of that increase. Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6% over the past year."

"Contractors remain relatively upbeat, according to ABC’s Construction Confidence Index, and ongoing strength in manufacturing and publicly financed segments justifies that confidence," said Basu. "Unfortunately, conditions may prove challenging in other segments over the next few quarters. Interest rates remain elevated and are likely to rise at least once more over the second half of 2023, exacerbating already tight credit conditions and ultimately limiting construction activity."

Press Release from Associated General Contractors of America: Construction Spending Shows Mixed Results in May as Infrastructure Categories Lag While Manufacturing Projects and Homebuilding Surge

Construction Association Urges Federal Officials to Issue Timely, Clear, and Consistent Regulations That Will Facilitate Spending to Proceed on a Wide Range of Projects Already Approved by Congress

WASHINGTON, July 3—Total construction spending in May increased by 0.9 percent from April and 2.4 percent year-over-year as gains in manufacturing construction and single-family homebuilding offset a downturn in major infrastructure segments, according to an analysis today by the Associated General Contractors of America of new federal data. Association officials cautioned that unclear and contradictory government regulations were slowing a variety of publicly funded projects and they urged the Biden administration to speed the awarding of contracts.

“The data for May show there has been no letup in the feverish pace of manufacturing construction but a very mixed picture for other project types,” said Ken Simonson, the association’s chief economist. “There have been strong year-over-year increases in most categories but it remains to be seen if the market is now cooling.”

Construction spending, not adjusted for inflation, totaled $1.925 trillion at a seasonally adjusted annual rate in May. Monthly and year-over-year changes varied among major segments. Spending on private nonresidential construction slipped 0.3 percent from April but jumped 20.5 percent from a year earlier. Spending on public nonresidential construction inched up 0.1 percent in May and 12.3 percent over 12 months. Private residential spending surged 2.2 percent for the month but remained 11.6 percent below the May 2022 level.

Two types of private nonresidential spending increased significantly in May, while most other categories lagged. Manufacturing construction jumped 1.0 percent for the month and 76.9 percent year-over-year. Office construction, which includes data centers, rose 0.7 percent and 6.7 percent, respectively. But monthly spending slumped 1.8 percent for commercial construction—comprising warehouse, retail, and farm projects—and 0.8 percent for private power construction. Private health care construction tumbled 2.1 percent for the month.

Public construction spending was mixed, as the largest infrastructure categories declined for the month and education spending was flat. Highway and street construction declined 0.4 percent from April and public spending on transportation facilities, such as airports, transit, and passenger rail, slid 0.8 percent. There were monthly increases of 1.1 percent in spending on sewage and waste disposal and 2.6 percent on water supply but a drop of 3.8 percent in conservation and development, such as river and harbor projects.

The pickup in private residential spending was led by a 1.7 percent increase in single-family homebuilding—the first gain since April 2022. Multifamily construction dipped by less than 0.1 percent, its first decline since July 2022.

Association officials urged the Biden administration to clarify the rules applying to U.S.-made construction materials, apprenticeship programs, and tax credits to fund promised energy projects. They warned that lack of clarity was keeping contractors from bidding on projects or proceeding on ones that had been awarded.

“Contractors are eager to build the infrastructure Congress has approved,” said Stephen E. Sandherr, the association’s chief executive officer. “It’s up to federal officials to make sure these projects can get built by issuing timely and clear rules that are consistent with Congressional intent.”