Associated Builders and Contractors Inc.

Nonresidential Construction Spending Up in May 2013

In a further sign of slow economic recovery, the nation’s nonresidential construction spending inched up 0.1 percent in May, according to the July 2 report by the U.S. Commerce Department. On a year-over-year basis, nonresidential construction spending was down 2.9 percent in May, with spending totaling $546.3 billion on a seasonally adjusted, annualized basis.

A 1.8 percent increase in public nonresidential construction spending barely offset the impact of a 1.4 percent decline in spending on privately financed nonresidential construction projects. Private nonresidential construction spending is down 0.9 percent while public nonresidential construction spending is down 4.9 percent.

Ten of the 16 nonresidential construction sectors posted increases in spending for the month, including:

  • Religious, up 7.2 percent
  • Water supply, up 6.2 percent
  • Transportation, up 3.7 percent
  • Power, up 2.9 percent

Six of 16 sectors registered increases compared to one year ago, including:

  • Lodging, up 18.3 percent
  • Transportation, up 10.6 percent
  • Water supply, up 9 percent

Five of the 16 nonresidential construction sectors posted decreases in spending for the month, including:

  • Manufacturing, down 8.1 percent
  • Communication, down 6.1 percent
  • Commercial construction, down 2.5 percent

Sectors posting the largest decreases from May 2012 include:

  • Communication, down 13.5 percent
  • Amusement and recreation, down 11.5 percent
  • Conservation and development, down 10.3 percent

Residential construction spending increased 1.2 percent for the month and is up 22.7 percent compared to the same time last year.

Total construction spending - which includes both nonresidential and residential spending - was up 0.5 percent for the month and is up 5.4 percent from May 2012.

“For much of the past year, privately financed activities have been recovering in conjunction with the nation’s moderate economic recovery, while publicly financed construction had been in decline—a reflection of constrained public capital budgets,” said Associated Builders and Contractors Chief Economist Anirban Basu.

“However, in May two large segments closely associated with public financing, water supply and transportation, experienced a material rise in activity,” Basu remarked. “At the same time, private activity declined in the aggregate, including in manufacturing, communication and commercial categories.

“This is unlikely to emerge as a stable pattern,” Basu said. “The economy has now entered its fifth year of economic recovery and many economic forecasters expect an acceleration of growth later this year and in 2014.

“That should help boost private construction activity,” added Basu. “Meanwhile, sequestration is ongoing and state and local government capital budgets continue to be constrained by rising Medicaid, pension, retiree health care and other costs. Consequently, May is likely to prove an aberration.

“Overall, nonresidential construction spending failed to progress significantly in May, and that has been the story for much of the past year,” Basu said.

“On a year-over-year basis, nonresidential construction spending is actually down nearly 3 percent, with much of the decline attributable to a nearly 5 percent reduction in public spending,” stated Basu. “If optimistic economic forecasts prove correct, the upcoming year should be better, with growth in private construction activities leading the way.”

View the April spending report.

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