Associated Builders and Contractors Inc.

Nonresidential Construction Spending Slips Despite Pent-up Demand

Despite a pent-up demand for construction activity, the nation’s nonresidential construction spending slipped 0.6 percent in November, with outlays decreasing to a seasonally adjusted annual rate of $564.1 billion, according to the January 2, 2013, report by the U.S. Census Bureau. Year-over-year, total nonresidential construction spending is up 2.9 percent.

2013 Could See More Private Spending, Less Public Funding

Both private and public nonresidential construction spending was down for the month. Private spending fell 0.7 percent and public spending was down 0.5 percent. Private nonresidential construction was up 8.2 percent from the same time last year while public nonresidential construction spending was down 2.3 percent over the same period.

Construction sectors posting the largest monthly decreases include:

  • conservation and development, down 13.5 percent
  • religious, down 6 percent
  • amusement and recreation, down 5.7 percent

Construction sectors with the largest year-over-year decreases in spending include:

  • conservation and development, down 16.3 percent
  • religious, down 9.9 percent
  • public safety, down 7.2 percent
  • highway and street, down 5.8 percent
  • amusement and recreation, down 5.6 percent

Only four nonresidential construction sectors posted increases for the month:

  • communication, up 3.3 percent
  • sewage and waste disposal, up 1.4 percent
  • transportation, up 1.3 percent
  • highway and street, up 0.4 percent

Seven sectors maintained spending above levels from one year ago:

  • transportation, up 22.7 percent
  • lodging, up 21.9 percent
  • power, up 13.4 percent
  • commercial, up 5.7 percent
  • manufacturing, up 4.6 percent
  • communication, up 4.1 percent
  • office, up 2.8 percent

Residential construction spending increased 0.4 percent for the month and is up 18 percent from the same time last year.

Overall, total construction spending - which includes both nonresidential and residential spending - was down 0.3 percent for the month and is up 7.7 percent compared to November 2011.

"The November construction spending report does not offer many surprises," said Associated Builders and Contractors Chief Economist Anirban Basu. “With fiscal cliff concerns hanging over the heads of decision makers, construction starts activity has been sporadic and construction spending momentum has withered.

“Because of the weak monthly performance, fewer than half of the 16 nonresidential construction segments report year-over-year gains and many of those only recorded gains in the single digits,” Basu said. “In addition, nonresidential construction spending weakness was broad-based, encompassing both private and public spending.

“With at least some of the fiscal cliff issues now behind us, prospects for renewed construction activity momentum have improved,” said Basu. “While improvement in construction activity will likely require several months to become apparent, broader economic factors suggest that pent-up demand for construction has been building.

“ABC’s 2013 construction forecast has remained consistent with the notion that America would not fall off her fiscal cliff and construction momentum would be renewed by the latter part of next year,” Basu said. “What has transpired in the last few days indicates that this forecast remains likely to come true.”

View the October 2012 Spending report.