Summary
Private nonresidential construction spending decreased 0.7 percent in October 2008 compared to September, according to a Dec. 1 release by the U.S. Census Bureau. Total nonresidential construction spending rose 8.3 percent since last year and remained fairly flat in October – down 0.1 percent to $725.7 billion (see graph), while private nonresidential construction put in place rose 9.1 percent on a year-over-year basis to reach $417.7 billion.
Twelve of the 16 subsectors within nonresidential construction produced year-over-year gains in October. Segments that posted the largest increases included manufacturing, up 53.7 percent; public safety, up 24 percent; and power, up 21.9 percent. Ten subsectors produced monthly gains in October with amusement and recreation posting one of the largest increases of 3.2 percent. Conservation and development also increased 6.9 percent on a monthly basis, but fell 9.7 percent compared to last year.
Communication posted one of the largest decreases falling 20.4 percent compared to last year and down 3.9 percent compared to September. Religious construction fell 6.3 percent compared to October 2007 and was down 2.4 percent on a monthly basis. Commercial construction was also down 11.2 percent year over year.
Public nonresidential construction was up 0.7 percent from September and rose 11.1 percent compared to last year. Residential construction continues to decline, dropping 3.5 percent on a monthly basis and 23.6 percent from last October. Total construction value was down 1.2 percent from September and 4.6 percent from the same time last year.
What This Means
"Construction measures are typically viewed as lagging indicators since the negotiating, planning and deal-making are often completed many months before actual construction begins," said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. "October 2008 shows the numbers for the first full month since the financial crisis brought the global financial system to a near-halt in mid-September, but the construction value put-in-place numbers hardly reflect the full impact of the events of September and October.
"For the rest of 2008 and into 2009, the data regarding private nonresidential construction activity will continue to deteriorate as fewer deals are brokered and as construction starts remain subdued," Basu continued. "Even as the data deteriorate, the seeds of a construction recovery are being sown in the form of falling construction materials prices and interest rates. Given these factors as well as ongoing efforts to stimulate the economy, it may be that a weak 2009 will be followed by periods of considerably more robust construction activity."