Associated Builders and Contractors Inc.

Nonresidential Construction Spending Increases 1.6 Percent in August 2011

(October 3, 2011) - In a bit of unexpected news, nonresidential construction spending, which includes both privately and publicly financed construction, was $553.1 billion in August, up 1.6 percent for the month and 0.1 percent higher from one year ago, according to the October 3 report by the U.S. Census Bureau.

 

Private nonresidential construction spending inched up 0.2 percent in August and is 5.6 percent higher from one year ago. Public nonresidential construction spending was 3 percent higher for the month – the largest monthly increase since February 2009 – but was down 5.8 percent compared to the same time last year.

Meanwhile, 12 of the 16 nonresidential construction subsectors posted increases for the month, including conservation and development, up 6.5 percent; public safety, 5.3 percent higher; sewage and waste disposal, up 4.5 percent; and highway and street, 3.6 percent higher. Five subsectors experienced growth in construction spending from August 2010: power, up 21.5 percent; commercial, 9.1 percent higher; conservation and development, up 6.5 percent; health care, 3.3 percent higher; and manufacturing, up 2.9 percent.

In contrast, four construction subsectors had decreases in spending for the month: lodging, down 5.6 percent; communication, 3.7 percent lower; commercial, down 2.7 percent; and health care-related construction, 0.3 percent lower. Eleven subsectors experienced reductions in construction spending over the last twelve months including lodging, 28.6 percent lower; religious, down 16.9 percent; sewage and waste disposal, down 13.2 percent; water supply, 12 percent lower; and amusement and recreation, down 11.6 percent.

Residential construction spending increased 0.9 percent for the month, and is up 2.9 percent over the last 12 months. Overall, total construction spending – which includes both nonresidential and residential – rose 1.4 percent in August, and is up 0.9 percent compared to August 2010.

"Today's release should be considered a bit of unexpected good news," said Associated Builders and Contractors Chief Economist Anirban Basu. "Current economic conditions pointed towards a much less rosy prediction of construction spending.

"However, many economists continue to stress the possibility of another recession, which, among other things, would have the impact of further constraining demand for construction services," Basu said.

"Over the past month, both publicly and privately financed construction spending grew – an indication that recessionary forces are being held at bay for now," said Basu. "Among the leading categories of monthly growth were conservation and development, public safety, and sewage and waste disposal.

"Because construction spending represents a lagging indicator of economic activity, it may be that the growth in construction spending last month is largely a reflection of the economy as it had been entering the year," Basu said. "Since that time, the economy has begun to dim, and presumably so too has the outlook for construction spending.

"It is worth noting that publicly financed construction expanded more rapidly than privately financed construction. This is certainly a reversal of recent previous reports," said Basu. "Given the fiscal condition of state and local government budgets, and with federal stimulus money continuing to be spent, the public sector is not well positioned to motivate growth in the demand for construction sectors in the months ahead."

View the previous spending report.

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