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05/04/2021

Nonresidential construction spending slips in March

On a year-over-year basis, spending is down 7.4%.
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Associated Builders and Contractors (ABC) reported that nonresidential construction spending fell 1.1% in March.

On a seasonally adjusted annualized basis, nonresidential spending totaled $778.5 billion for the month. ABC’s findings are from analysis of data published by the U.S. Census Bureau.

On a year-over-year basis, spending is down 7.4%. 

Spending was down on a monthly basis in 11 of the 16 nonresidential subcategories. Private nonresidential spending was down 0.9%, while public nonresidential construction spending fell 1.5% in March.

“While the longer-term outlook for nonresidential construction is superb, the pandemic is lingering, creating much damage to commercial real estate fundamentals,” said ABC Chief Economist Anirban Basu. “The lodging, office and commercial segments experienced declines in spending in March. Office vacancy rates are elevated in many markets, and the industry experienced negative net absorption. The trials and tribulations of hotel operators, retailers and restauranteurs are also well known.”

Basu also noted that public construction spending was weak in March and is down more than 5% on a year-over-year basis. 

“While large-scale federal infrastructure outlays are likely in the future, that money has yet to arrive,” Basu said. “State and local government finances have generally held up far better than many had predicted earlier in the COVID-19 crisis, but many governments have had to spend significant operational sums to countervail the public health crisis and therefore had to redirect money away from infrastructure.”

Looking ahead, Basu says that as the broader economic recovery picks up additional speed later this year with more pervasive vaccinations and re-openings, both private and public construction spending should begin to manifest more positive momentum later this year and into 2022.