Nonresidential construction spending decreased in May, its first drop in nearly a year

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.”

One of the hardest decisions multifamily developers and their design teams have to make is what mix of amenities they’re going to put into each project. A lot of squiggly factors go into that decision: the type of community, the geographic market, local recreation preferences, climate/weather conditions, physical parameters, and of course the budget. The permutations are mind-boggling.