"Developer-driven activities like lodging and commercial construction are still being hammered in an environment characterized by tight credit, rising vacancies and still-fragile consumer sentiment." —ABC Chief Economist Anirban Basu
Private nonresidential construction spending declined 0.4 percent in February and is down 24.3 percent compared to the same time last year, according to the April 1 spending report produced by the U.S. Census Bureau. Total nonresidential construction spending also slipped 1 percent for the month and is 16.2 percent lower year over year. As of February, the value of construction put-in-place was $587.7 billion on an annualized basis.
Four of the 16 nonresidential construction subsectors experienced spending increases for the month: manufacturing, up 3.4 percent; power, up 1.1 percent; communication, up 0.7 percent; and public safety, up 0.6 percent. On a year-over-year basis, the largest increases in nonresidential construction spending were in transportation, up 11.5 percent; power, up 5.2 percent; and conservation and development-related construction, up 0.5 percent. Only power saw an increase both monthly and year over year.
Construction subsectors that experienced a spending decrease in February included lodging, down 6.2 percent; sewage and waste disposal, down 5 percent; and water supply, down 4.6 percent. On a year-over-year basis, the subsectors posting the largest declines included lodging, down 52.5 percent; commercial, down 36.2 percent; and office construction, down 31.2 percent.
Public nonresidential construction spending was down 1.7 percent for the month and is 5.5 percent lower than February 2009. Residential construction spending slipped 2.1 percent for the month and 3.8 percent year over year. Total construction spending was down 1.3 percent compared to January and 12.8 percent compared to the same time last year.
Analysis
“With the exception of the monthly increase in manufacturing-related construction, there is little in today’s report to be happy about as nonresidential construction spending continues to decline overall,” said ABC Chief Economist Anirban Basu. “The report is consistent with ABC’s forward-looking Construction Backlog Indicator, which also shows that on average, nonresidential construction backlog continues to decline nationally. In addition, developer-driven activities like lodging and commercial construction are still being hammered in an environment characterized by tight credit, rising vacancies and still-fragile consumer sentiment.
“However, there is more to today’s report than meets the eye,” said Basu. “February’s numbers were heavily influenced by weather events. It’s possible the data would have been less negative without the unusually strong storms that impacted the northeast. March data will shed additional light on this issue and will help determine the weather’s true effect on February’s report.”
