Nonresidential Construction Spending Falls 1% in July

Spending in 10 of 16 nonresidential subcategories was down on a monthly basis.

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National nonresidential construction spending fell 1.2% in July, according to an Associated Builders and Contractors analysis of U.S Census Burea data. On a seasonally adjusted annualized basis, spending totaled $809.1 billion for the month.

Of the 16 nonresidential subcategories, 10 were down on a monthly basis. Private nonresidential spending declined 1% while public nonresidential construction spending was down 1.3% in July. 

“There are two primary countervailing forces influencing the trajectory of nonresidential construction spending,” says Anirban Basu, chief economist of Associated Builders and Contractors. “The first is a force for good and involves the reopening of the economy and associated rebound in overall economic activity. Despite the lingering pandemic, third quarter GDP growth is likely to be quite strong. All things being equal, this would tend to strengthen business for contractors.

“However, the second force at work is not benign and appears to be the stronger of the two,” says Basu. “The crisis has resulted in tighter project financing conditions, battered state and local government finances, substantial commercial vacancy and uncertainty regarding the future of key segments, such as office and lodging. And while backlog was strong at the start of the year, contractors indicate that it is now declining rapidly, in part due to abundant project cancellations.”

“Next year is shaping up to be an especially harsh one for many contractors, especially as some are already indicating that they are nearing the end of their backlog,” says Basu. “The wild card, as is often the case, is Congress. Another stimulus package could go a long way toward improving the trajectory of overall nonresidential construction spending, particularly one with a sizable infrastructure component. The upshot is that declines in nonresidential construction spending are likely even in the context of broader economic recovery.”


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