A small increase in total construction spending in September masked a widening gap between declines in most nonresidential segments and robust gains in residential construction, according to an analysis by the Associated General Contractors of America of government data released today. Association officials warned nonresidential construction is headed for an even steeper slump unless officials in Washington enact relief promptly, noting that their latest industry survey found three out of four respondents had experienced a postponed or cancelled project since the start of the pandemic.
“The September spending report shows the gulf between housing and nonresidential markets is growing steadily wider,” said Ken Simonson, the association’s chief economist. “In our October survey, 75% of respondents reported a postponed or cancelled project, up from 60% in August and 32% in June.”
Construction spending in September totaled $1.41 trillion at a seasonally adjusted annual rate, an increase of 0.3% from the pace in August and 1.5% higher than in September 2019. Private and public nonresidential spending slumped by a combined 1.6% since August and 4.4% from a year earlier, while private residential spending climbed by 2.8% for the month and 9.9% year-over-year.
Private nonresidential construction spending declined for the third consecutive month, falling 1.5% from August to September, with decreases in nine out of 11 categories. The largest private nonresidential segment, power construction, declined 2.2% for the month. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—slid 1.9%, manufacturing construction declined 2.1%, and office construction rose 0.3%. Simonson noted that the office figure was likely inflated by inclusion of data centers, a segment that appears to have held up well.
Public construction spending fell 1.7% in September, the fourth monthly decline in a row. The largest public category, highway and street construction, tumbled 5.4% for the month. Among other large public segments, educational construction increased 2.0% for the month, while transportation construction dipped 0.3%.
Private residential construction spending increased for the fourth-straight month, rising 2.8% in September. Single-family homebuilding soared 5.7% for the month, while multifamily construction spending rose 1.2% and residential improvements declined 0.4%.
Association officials noted that the coronavirus was having a significant, negative impact on most commercial construction firms. In addition to widespread project delays and cancellations, the association’s recent survey found most contractors do not expect to expand their headcount during the next 12 months because of the pandemic. Many contractors report they are looking to Washington to enact new infrastructure investments and liability reforms to offset the ongoing impacts of the coronavirus.
“The pandemic is suppressing demand for new office buildings, hotels and shopping centers even while it inspires many people to build bigger homes,” said Stephen E. Sandherr, the association’s chief executive officer. “Without new federal investments in infrastructure and other needed relief measures, commercial firms will have a hard time retaining staff or investing in new equipment and supplies.”
Related Stories
Market Data | Nov 2, 2018
Nonresidential spending retains momentum in September, up 8.9% year over year
Total nonresidential spending stood at $767.1 billion on a seasonally adjusted, annualized rate in September.
Market Data | Oct 30, 2018
Construction projects planned and ongoing by world’s megacities valued at $4.2trn
The report states that Dubai tops the list with total project values amounting to US$374.2bn.
Market Data | Oct 26, 2018
Nonresidential fixed investment returns to earth in Q3
Despite the broader economic growth, fixed investment inched 0.3% lower in the third quarter.
Market Data | Oct 24, 2018
Architecture firm billings slow but remain positive in September
Billings growth slows but is stable across sectors.
Market Data | Oct 19, 2018
New York’s five-year construction spending boom could be slowing over the next two years
Nonresidential building could still add more than 90 million sf through 2020.
Market Data | Oct 8, 2018
Global construction set to rise to US$12.9 trillion by 2022, driven by Asia Pacific, Africa and the Middle East
The pace of global construction growth is set to improve slightly to 3.7% between 2019 and 2020.
Market Data | Sep 25, 2018
Contractors remain upbeat in Q2, according to ABC’s latest Construction Confidence Index
More than three in four construction firms expect that sales will continue to rise over the next six months, while three in five expect higher profit margins.
Market Data | Sep 24, 2018
Hotel construction pipeline reaches record highs
There are 5,988 projects/1,133,017 rooms currently under construction worldwide.
Market Data | Sep 21, 2018
JLL fit out report portrays a hot but tenant-favorable office market
This year’s analysis draws from 2,800 projects.
Market Data | Sep 21, 2018
Mid-year forecast: No end in sight for growth cycle
The AIA Consensus Construction Forecast is projecting 4.7% growth in nonresidential construction spending in 2018.