Andrey Popov | stock.adobe.com
National nonresidential construction spending rose 1.9 percent in April, according to an analysis of data released by the U.S. Census Bureau by the Washington-based Associated Builders and Contractors (ABC).
On a seasonally adjusted annualized basis, nonresidential spending totaled $1.05 trillion.
Spending strength was broad, rising in 13 of the 16 nonresidential subcategories on a monthly basis. Private nonresidential spending was up 2.4 percent in April, while public nonresidential construction spending was up 1.1 percent, says the ABC.
“What recession?” ABC Chief Economist Anirban Basu says. “Despite a slew of headwinds, including higher interest rates, prominent bank failures, a near-miss debt ceiling crisis and pervasive fears of recession, money continues to flow into the U.S. nonresidential construction segment. Manufacturing-related construction spending growth continues to lead the way, but even segments that had been weak, such as lodging, are picking up steam."
Commercial construction—comprising warehouse, retail, and farm structures—climbed 0.7 percent in April and 23.7 percent over 12 months. Highway and street construction rose 1.2 percent and 21.4 percent, respectively, the Arlington, Virginia-based Associated General Contractors of America (AGC) says.
AGC Chief Economist Ken Simonson says finding labor remains a challenge in the construction arena.
“Today’s report shows there has been no letup in most categories of construction despite worries about tighter credit and a possible slowdown in the broader economy,” he says. “The top concern for most contractors is finding qualified workers, not projects to bid on.”
AGC officials have urged members of Congress and the Biden administration to work together to boost investments in construction training and education programs. The AGC says that construction careers pay well above the average job. They also urged federal officials to enact immigration reforms that will allow more people to lawfully enter the country and work in construction.
“It is encouraging to see growing public and private sector demand for construction,” says Stephen E. Sandherr, CEO of AGC. “Federal officials can help make sure workers are prepared to take advantage of the many high-paying opportunities available to them in the construction sector.”
The AGC says private residential construction spending climbed 0.5 percent for the month but fell 9.2 percent for the year. Spending on new multifamily construction rose 0.6 percent from March and 24.9 percent from April 2022, the largest rise since 2016. But total residential spending was dragged down by single-family construction, which declined for the 12th month in a row, falling 0.8 percent from March and 24.7 percent from April 2022.
Outside of labor concerns, Basu says the outlook is generally positive for contractors.
“It appears that the optimism that ABC contractors have been expressing about their prospects is proving justified,” he says. “Backlog is stable, and there is still evidence of significant pricing power, helping to support contractor profit margins. Moreover, public construction spending stands to remain strong even if the economy enters recession later this year with considerable sums of money lined up to drive road, bridge and other work during the years ahead.”
Despite the generally positive outlook, Basu says it’s possible some construction sectors could feel the effects of a possible recession in 2024.
“The combined impacts of growing weakness in consumer spending, tightening credit conditions, lag effects associated with prior Federal Reserve rate increases and uncertainty stemming from high-stakes elections could eventually catch up to the broader economy and certain construction segments,” he says.
