[NEWS TRACKER] Economists Not Optimistic for Nonresidential Construction Outlook

ABC Chief Economist Anirban Basu says trajectory of nonresidential construction spending does not appear bright and AGC says demand will likely stagnate without new federal infusion.

Construction News Tracker is presented by Caterpillar and produced by ForConstructionPros.com.

Construction outlook beginning to dim

The latest analysis of government data by AGC shows that construction spending increased by 1.4% in August. Residential construction gains fueled by single family housing outweighed decreases in many private nonresidential and public categories reviewed. AGC said that demand will likely stagnate without any new federal infusion to offset the coronavirus economic impact.

AGC Chief Economist Ken Simonsen says that the huge divide between housing and nonresidential markets will continue to widen over the coming months due to continued business closures and worker layoffs. The seasonally adjusted rate for construction spending in August totaled $1.41 trillion.

ABC Chief Economist Anirban Basu says the trajectory of nonresidential construction spending does not appear bright. Commercial real estate fundamentals remain poor with elevated vacancy rates and tighter lending conditions. State and local finances have been decimated by the virus, and there's less support for future projects on the horizon.

AGC also reported that construction employment decreased in 241 or 67% of the nation's metro areas from August of 2019 to August of 2020. However, construction gained 60,000 jobs in September. Chief Economist Ken Simonsen says residential construction appears to be improving in many locales while private and nonresidential construction is shrinking.

One of the big problems shaping up across the nation, notes AGC, is the lack of new project startups and the spread of project cancellations. Simonsen pointed out that construction employment was stagnant in 29 areas while increasing in 88 metros over the past 12 months. August construction employment came in at all time lows in 19 metros while 33 reported highs for August in data going back to 1990. Depressed demand for construction continues across the country, say AGC officials.

The nation's private sector jobs gained 661,000 in September placing the unemployment rate at 7.9%. Those figures from the U.S. Labor Department indicate the labor market is continuing to dig out of the pandemic hole but at a much slower pace than during the summer months. Overall the nation lost 22 million jobs in March and April and has now replaced 11.4 million of them. Job growth is cooling off as many furloughed now face permanent layoff, and the Labor Department says it’ll take another 17 months to fully recover.

The Dodge Momentum Index rose to a mark of 130.8 in September, an increase of 3.7%. The Index is a monthly measure of nonresidential projects in planning that leads construction spending by a year. Its August mark was 126.2. Its commercial component rose 3.9%, and the institutional component inched up 3.2%. The commercial side is being pushed by a large number of warehouse projects entering planning.

Border wall construction

A race is on to build as much border wall as possible before the November 3 election. The U.S. Customs and Border Protection Agency (CBP) reports that the construction rate has nearly doubled since the beginning of the year, and crews are adding nearly two miles per day of structure. The CBP claims that 341 miles of border wall has been installed thus far, and they aim to build 450 miles by the end of the year as construction crews work 24/7 on the wall in at least five locations.

World of Concrete moves to June 2021

World of Concrete has made the proactive decision to move its annual Las Vegas convention from January to June next year. Lots of stakeholder and industry association discussions went into the final decision to present World of Concrete (WOC) June 8 to 10 at the Las Vegas Convention Center live and in person. Jackie James, WOC group director, said it’s the first time in 46 years the association has been forced to reschedule its key presentation, and the new June dates give everyone the opportunity to plan accordingly.

Skanska begins repairs after Hurricane Sally

We recently told you about the damage left behind by Hurricane Sally as it pummeled the Florida coastline near Pensacola. The Pensacola Bay Bridge sustained major damage when barges whipped by high winds owned by Skanska Construction broke loose slamming into the structure piers and supports causing 22 spans to be destroyed.

Skanska was in the midst of completing construction on the three-mile-long structure which it began in 2017. Following inspection by Florida Department of Transportation engineers, Skanska can begin repairs. But the overall project will tack on an additional six months of construction time leaving residents and motorists with a major detour and a two hour commute.

In closing, Apathy can only be overcome by enthusiasm.

This is Construction News Tracker looking over the industry that makes the world a better place, presented by Caterpillar and produced by ForConstructionPros.com.

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