Nonresidential construction spending down for first time in nearly a year

National nonresidential construction spending decreased 0.2 percent in May, according to an Associated Builders and Contractors (ABC) analysis of data published by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.

Spending declined monthly in nine of the 16 nonresidential subcategories. Private nonresidential spending fell 0.3 percent, while public nonresidential construction spending increased 0.1 percent in May.

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“Nonresidential construction spending declined in May, ending a streak of 11 consecutive monthly increases,” says ABC Chief Economist Anirban Basu. “While spending is up more than 17 percent over that span, manufacturing-related construction has accounted for the majority of that increase. Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6 percent over the past year.”

According to ABC’s Construction Confidence Index, contractors remain relatively upbeat. Basu says ongoing strength in manufacturing and publicly financed segments justifies that confidence.

“Unfortunately, conditions may prove challenging in other segments over the next few quarters,” he says. “Interest rates remain elevated and are likely to rise at least once more over the second half of 2023, exacerbating already tight credit conditions and ultimately limiting construction activity.”