Nonresidential Spending Slip in February No Cause for Alarm

Harsh weather conditions in parts of the country have an undue effect on construction spending data

Associated Builders and Contractors
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Nonresidential construction spending dipped in February, falling 1.4% on a monthly basis according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors (ABC). Spending in the nonresidential sector totaled $690.3 billion on a seasonally adjusted, annualized basis in February. While this represents a step back from January's figure of $700.3 billion (revised down from $701.9 billion), it is still 1.5% higher than the level of spending registered in December 2015 and 10.1% higher than February 2015.  

"February's weather was particularly harsh in certain parts of the country, including in the economic activity-rich Mid-Atlantic region, and that appears to have had an undue effect on construction spending data," said ABC Chief Economist Anirban Basu.  "February data are always difficult to interpret, and the latest nonresidential construction spending figures are no different. Seasonal factors have also made state-level data very difficult to interpret. 

"Beyond meteorological considerations, there are other reasons not to be alarmed by February's decline in nonresidential construction spending," said Basu. "Today's positive construction employment report indicates continued economic growth. Moreover, much of the decline in volume was attributable to manufacturing, but the ISM manufacturing index recently crossed the threshold 50 level, indicating that domestic manufacturing is now expanding for the first time in seven months."

Eight of the sixteen nonresidential subsectors experienced spending decreases in February, though almost half of the total decline in spending is attributable to the 5.9% decline in manufacturing-related spending.

The following 16 nonresidential construction sectors experienced spending increases in February on a monthly basis:

  • Spending in the amusement and recreation category climbed 0.4% from January and is up 13.7% from February 2015.
  • Lodging-related spending is up 0.4% for the month and is up 30.1% on a year-ago basis. 
  • Water supply-related spending expanded 1.9% on a monthly basis and 3.2% on a yearly basis.
  • Spending in the office category grew 3.8% from January and is up 25.3% on a year-ago basis.
  • Transportation-related spending expanded 0.5% month-over-month and 5.8% year-over-year.
  • Health care-related spending expanded 2% from January and is up 3.3% from February 2015.
  • Public safety-related spending is up 1.8% for the month, but is down 5.3% for the year. 
  • Commercial-related construction spending inched 0.1% higher for the month and grew 11% for the year. 

Spending in eight of the nonresidential construction subsectors fell in February on a monthly basis:

  • Educational-related construction spending fell 2.4% from January, but has expanded 8.5% on a yearly basis. 
  • Communication-related spending fell 15% month-over-month, but expanded 11.8% year-over-year.
  • Spending in the highway and street category fell 2% from January, but is 24.5 higher than one year ago.
  • Sewage and waste disposal-related spending fell 2.4% for the month, but is up 2.3% for the year.
  • Conservation and development-related spending is 4.6% lower on a monthly basis and 16.8% lower on a year-over-year basis. 
  • Spending in the religious category fell 4% for the month and is up just 0.7% for the year. 
  • Manufacturing-related spending fell 5.9% on a monthly basis and is up only 0.8% on a yearly basis.

Spending in the power category fell 0.6% from January, but is 4.8% higher than one year ago.