Tag Archive for 'U.S. Census Bureau'

ABC Reports: Nonresidential Construction Spending Remains Elevated in May, But Private Sector Falters

Nonresidential Construction Spending Remains Elevated in May, But Private Sector Falters, Says ABC
Nonresidential construction spending inched 0.1 percent higher on a monthly basis in May, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data released today. Spending, which totaled $749 billion on a seasonally adjusted annual rate for the month, is up 3 percent from the same time last year.

Public nonresidential spending increased 0.6 percent for the month and 4.9 percent for the year, while the private sector contracted 0.3 percent for the month but increased 1.8 percent year-over-year. The dip in private sector is spending is largely attributable to a 2.3 percent decrease in manufacturing-related spending.

“The prediction has been that publicly financed construction spending would rise in America,” said ABC’s Chief Economist Anirban Basu. “The logic of this is rooted in two basic factors. The first is that the ongoing economic expansion, now in its 10th year, has steadily improved fiscal conditions in state and local government.  With more money to spend, more communities are empowered to deal with deferred maintenance and even to expand the capacity of certain key infrastructure, whether roads, mass transit, wastewater treatment plants or water systems.

“The other factor relates to a political cycle,” said Basu. “Increasingly, policymakers have been making the case—and much of the electorate seems convinced—that stepped-up infrastructure investment is needed. Accordingly, in recent years, 31 states have expanded their transportation funding, including 24 of them by raising state gas taxes. Not surprisingly, public construction spending is higher on month-over-month and year-over-year bases.

“What has been less clear is whether privately financed construction would continue to rise,” said Basu. “While the economy remains strong, a number of headwinds have formed, particularly concerns regarding tariffs and trade wars. Construction material prices have already begun to surge, in part because of trade disputes involving materials such as softwood lumber, steel, and aluminum. This increases project costs without offering developers and their financiers any offsetting commercial benefit.

“Moreover, fears of a full-blown trade war between the United States and NAFTA partners, the European Union and/or China have likely resulted in some businesses and investors adopting a wait-and-see attitude,” said Basu. “This helps explain the recent dip in construction spending related to manufacturing. With key interest rates, like the prime rate, also on the rise, the motivation to move forward with projects may be waning. Rising borrowing costs make it less likely that a project will satisfy a given investor’s hurdle rate. Rising labor costs contribute further to this calculus.

“The upshot is that contractors would likely be primary beneficiaries of a less precarious policymaking environment,” said Basu. “Businesses, markets, developers and financiers each prefer certainty. They also prefer input costs that aren’t surging. This strongly suggests that, while private construction spending should remain sturdy during the months ahead given healthy backlog and current economic momentum, the outlook for construction spending may be rather different in a few quarters.”

 

 

Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index.

Associated Builders and Contractors (ABC) is a national construction industry trade association established in 1950 that represents more than 21,000 members. Founded on the merit shop philosophy, ABC and its 70 chapters help members develop people, win work and deliver that work safely, ethically and profitably for the betterment of the communities in which ABC and its members work. Visit abc.org

ABC Reports: Nonresidential Construction Spending Plummets in June, Driven by Public Sector

Nonresidential construction spending fell by 2 percent on a monthly basis in June 2017, totaling $697 billion on a seasonally adjusted, annualized basis according to an analysis of U.S. Census Bureau data released today by Associated Builders and Contractors. June represents the first month during which spending has dipped below the $700 billion per year threshold since January 2016.

June’s weak construction spending report can be largely attributed to the public sector. Public nonresidential construction spending fell 5.4 percent for the month and 9.5 percent for the year, and all twelve public subsectors decreased for the month. Private nonresidential spending remained largely unchanged, increasing by 0.1 percent for the month and 1.1 percent for the year. April and May nonresidential spending figures were revised downward by 1.1 percent 0.4 percent, respectively.

“Coming into the year, there were high hopes for infrastructure spending in America,” said ABC Chief Economist Anirban Basu. “The notion was that after many years of a lack of attention to public works, newfound energy coming from Washington, D.C., would spur confidence in federal funding among state and local transportation directors as well among others who purchase construction services. Instead, public construction spending is on the decline in America. Categories including public safety and flood control have experienced dwindling support for investment, translating into a nine percent decline in public construction spending over the past twelve months.

“On the other hand, several private segments continue to manifest strength in terms of demand for construction services,” said Basu. “At the head of the class are office construction, driven by a combination of job growth among certain office-space-using categories as well as lofty valuations, and communications, which is being driven largely by enormous demand for data center capacity.

“While there are certainly some parts of the nation experiencing significant levels of public construction, those areas have increasingly become the exception as opposed to the rule,” said Basu. “The more general and pervasive strength is in private segments. Based on recent readings of the architecture billings index and other key leading indicators, commercial contractors are likely to remain busy for the foreseeable future. The outlook for construction firms engaged in public work remains unclear.

Despite Lofty Backlog, Nonresidential Construction Spending Remains Stagnant in May, Says ABC

Nonresidential construction spending expanded by 0.3 percent on both a monthly and yearly basis in May and stands at $714.3 billion on a seasonally adjusted annualized basis, according to analysis of a report from the U.S. Census Bureau released today by Associated Builders and Contractors (ABC).

Private nonresidential construction spending fell to $433.6 billion in May, a decline of 0.7 percent. Private nonresidential construction is now at its 2017 nadir, though it is 0.8 percent higher than one year ago. Contrary to the prevailing trend, public nonresidential construction spending rose 1.9 percent in May on a monthly basis but remains 0.5 percent lower than in May 2016.

“Interpreting nonresidential construction spending data has become more challenging in recent months,” said ABC Chief Economist Anirban Basu. “Among the sources of perplexity is the fact that the nonresidential construction spending data do not align neatly with trends in other key data.

“For instance, backlog remains strong and has been rising, according to and other recent industry surveys,” said Basu. “Construction employment has also continued to expand, consistent with the notion that the average contractor has been getting busier.  Industry stakeholder confidence remains reasonably high, though many industry participants continue to express alarm regarding growing construction skills shortages. But this sense of industry recovery is barely apparent in the nonresidential construction spending data, which indicate that spending has hardly expanded in nominal terms over the past year and is actually down in real terms.

“The other apparent inconsistency comes from the shift in construction spending growth from the private sector to the public sector,” said Basu.  “In prior quarters, it was private segments that drove industry-wide growth, particularly office, communications, lodging, amusement/recreation and commercial segments.  However, there has been some weakening in a handful of private segments recently, despite anecdotal information and survey data indicating elevated real estate developer confidence, low interest rates and busier architects.

“In May, it was public spending that led the way, including in the highway and street category, which has generally been a source of enormous disappointment since the Fixing America’s Surface Transportation Act became law in late 2015.  Whether the recent uptick in public construction spending is part of an emerging sustained trend or simply statistical anomaly is not clear.  What is clear is that overall nonresidential construction spending growth appears to be stalling, with many prospective purchasers of construction services having apparently adopted a wait-and-see attitude.”

ABC Says, Public Nonresidential Construction Spending Rebounds; Overall Spending Unchanged in February

Nonresidential construction spending remained unchanged in February, according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors (ABC). The segment totaled $701.9 billion on a seasonally adjusted annualized rate for the month, marking the seventh consecutive month in which nonresidential spending sat above the $700 billion threshold.

Private nonresidential construction spending faltered in February, with six of the 11 subsectors experiencing a month-over-month spending decrease. The communication category experienced a particularly precipitous decline, falling 8.1 percent for the month. Public nonresidential spending increased for the first time since October of 2016.

“Today’s construction spending report essentially left the status quo unchanged,” said ABC Chief Economist Anirban Basu. “Recent ABC construction confidence surveys indicate roughly flat spending expected over the next six months. Today’s report was consistent with those expectations.

“Many construction firm leaders expect that ultimately, nonresidential construction spending will begin to climb as the new administration in Washington begins to implement its pro-business agenda,” said Basu. “That said, there is an awareness that the impact of proposed pro-business policies will not be immediate and may actually not be felt in earnest until 2018 or even 2019.

“Even in the absence of policy impacts, there has been a general improvement in overall business confidence in America,” said Basu. “This should translate into better construction spending performance over the months ahead, particularly in privately financed categories.”

February 2017 Nonresidential Construction Spending

ABC Says: Nonresidential Construction Spending Slips to Start 2017

Nonresidential construction spending contracted during January, according to analysis of U.S. Census Bureau released today by Associated Builders and Contractors (ABC). Nonresidential spending fell 1.9 percent from December to $698.4 billion on a seasonally adjusted, annualized basis. This represents the first month total nonresidential construction spending dipped below $700 billion since July 2016.
Despite the monthly setback, year-over-year progress remains intact, with nonresidential spending increasing 1.5 percent since January 2016. However, in real terms, that represents virtually nonexistent growth. Private nonresidential spending remained unchanged for the month, while public sector spending plunged 4.7 percent. The greatest loss in spending volume occurred in the public safety, water supply and conservation and development segments.
“The significant loss in public construction spending momentum is hardly novel,” said ABC Chief Economist Anirban Basu. “For several years, public funding for construction activity has been flat and erratic. Public budgets remain constrained by underfunded pensions, surging Medicaid expenditures, and other non-infrastructure-related needs.
“The new president’s speech on Tuesday night discussed the need for additional infrastructure investment,” said Basu. “If the president is able to implement his public-private partnership plan, public construction spending is set to soar. However, there are many obstacles to his plan coming to fruition.

“Private construction spending was also soft in January, but the outlook remains upbeat,” said Basu. “Corporate confidence is high, architects became much busier during the period immediately following the presidential election, and capital from banks and other sources should be broadly available to developers during the year ahead.”

January 2017 Nonresidential Construction Spending