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Submitted by cdp-inc on June 9, 2020 - 2:20pm

Key Takeaways

  • National nonresidential construction spending decreased by 1.8% in April.
  • On a seasonally adjusted annualized basis, spending totaled $801.8 billion for the month, a 0.9% increase from April 2019.
  • “Nonresidential construction has fared far better than most economic segments during the COVID-19 crisis, but the industry’s headline spending numbers fail to fully capture the damage inflicted on many key segments by the pandemic.”

Press Release from Associated Builders and Contractors, Inc.

WASHINGTON, June 1—National nonresidential construction spending decreased by 1.8% in April, 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 $801.8 billion for the month, a 0.9% increase from April 2019.

Of the 16 subcategories, 13 were down on a monthly basis. Private nonresidential spending declined 1.3% in April, while public nonresidential construction spending was down 2.5% for the month.

“Nonresidential construction has fared far better than most economic segments during the COVID-19 crisis, but the industry’s headline spending numbers fail to fully capture the damage inflicted on many key segments by the pandemic,” said ABC Chief Economist Anirban Basu. “For instance, spending in the lodging category was down more than 12% in April relative to a year ago and down 11% in the amusement and recreation category. Spending is also down meaningfully in a number of categories that are public-sector intensive, including education and highway/street."

“In much of the nation, construction was deemed an essential industry, which helped to mitigate spending decreases,” said Basu. “But in many places, including in New York, New Jersey, Boston, Pennsylvania and California, construction was deemed nonessential. That has rendered ongoing work and backlog—which stood at 7.8 months in April, according to ABC’s Construction Backlog Indicator—less of an effective shield against the early stages of the broader economic downturn than it is normally. The nonresidential construction spending data would have been far worse but for a massive increase in spending in the public safety category, which is up 35% year over year due to investments made to shore up capacity to deal with COVID-19."

“As the nation slowly reopens, nonresidential contractors will face many challenges,” said Basu. “State and local government finances have been compromised, jeopardizing infrastructure spending going forward. Many office suites and storefronts have been vacated, which will suppress demand for new construction going forward. Capital will also be scarcer, resulting in greater difficulty securing financing for projects. Moreover, if the past is prologue, many dislocated construction workers will find jobs in other industries, given construction’s tendency to be among the last economic segments to fully recover.”

Press Release from Associated General Contractors of America

Construction Spending Shrinks 2.9 Percent In April As Public Agencies, Private Owners Halt Work; Association Urges Boost To Federal Financing

New Federal Investments in Transportation, Other Types of Infrastructure Will Help Offset Expected Declines in State and Local Funding as State Budgets Suffer Impacts of Coronavirus Lockdowns

Construction spending plunged in April as governmental agencies and project owners shut down ongoing work and canceled projects that were about to break ground, according to an analysis by the Associated General Contractors of America of government data released today. Association officials warned that further steep declines are inevitable for public projects unless the federal government acts quickly to invest in needed infrastructure and shore up crumbling state and local budgets.

“Bad though these numbers are, construction spending appears sure to shrink further,” said Ken Simonson, the association’s chief economist. “In our latest survey, 40 percent of contractors report that an upcoming project has been canceled. But this is a great time to undertake needed infrastructure projects, with more availability of labor, lower materials costs and record-low borrowing costs for many public agencies.”

Construction spending in April totaled $1.35 trillion at a seasonally adjusted annual rate, the lowest total since November. There were substantial decreases in spending in each of the major categories tracked by the Census Bureau: public construction spending fell by 2.5 percent from March to April, private nonresidential spending by 1.3 percent and private residential spending by 4.5 percent.

The economist noted that 10 out of 12 public and 10 out of 11 private nonresidential construction categories in the Census Bureau’s monthly construction spending release declined from March to April. He added that highway and street construction tumbled by an especially steep amount, 5.2 percent.

“Although there have been scattered reports of acceleration in highway spending, many state and local transportation departments have been postponing or canceling projects as fuel-tax and toll revenues plummet,” Simonson said. “The highway construction downturn is likely to intensify in future months because, in many states, April is normally the first month of significant highway spending following winter shutdowns. In addition, public educational construction dropped by 2.3 percent from March to April, while public spending on transportation infrastructure slipped by 1.4 percent. All public categories are at risk of further declines unless the federal government fills some of the holes that have opened in state and local government budgets.”

Association officials said that state and local funding is likely to continue to decline over the coming months as government officials address budget shortfalls caused by the coronavirus-related economic lockdowns. They urged federal officials to act quickly to address those funding shortfalls by passing new funding measures for transportation and other types of infrastructure. They noted that now is a great time to invest in infrastructure with use relatively light and a large pool of available labor to hire.

“Federal officials can help prevent the economic harm that will occur if state and local officials have to cut back on their infrastructure programs,” said Stephen E. Sandherr, the association’s chief executive officer. “Investing in infrastructure now will help put people back to work in high-paying construction careers while making the economy more efficient and vibrant for years to come.”