Private Nonresidential Construction Spending Continues to Climb in March

"The expectation is that privately financed construction volumes will continue to rebound gradually into the summer." —ABC Chief Economist Anirban Basu.

Spending on private nonresidential construction increased 1.8 percent in March according to the May 2 report by the U.S. Census Bureau. While private nonresidential construction spending has been increasing for the past three months, it is still 10.2 percent lower from March 2010. Total nonresidential construction spending – which includes both privately and publicly financed construction – was $531.1 billion on a seasonally adjusted annual rate in March, up 0.9 percent from the previous month, but 6.1 percent lower than the same time last year.

Ten of the sixteen nonresidential construction subsectors posted increases for the month including lodging, up 6.1 percent; manufacturing, 5.2 percent higher; health care, up 2.4 percent; power, up 1.8 percent; and office construction, 1.7 percent higher. Only four subsectors registered increases in spending compared to the same time last year with conservation and development 10.5 percent higher; highway and street up 4.9 percent; communication 4.7 percent higher; and power construction up 3.9 percent.

Of the six nonresidential construction subsectors posting decreases for the month, conservation and development was down 6 percent; communication was 2.5 percent lower; and water supply was down 1.9 percent. While posting significant increases for the month, several subsectors are lower compared to March 2010. They include lodging, down 31 percent; and manufacturing, down 28 percent. Other subsectors with decreases of more than 10 percent include religious, down 20.1 percent; public safety, down 17.6 percent; and office construction, down 13.7 percent.

Public nonresidential construction inched up 0.2 percent for the month, but was down 2.3 percent year-over-year. Residential construction spending increased 2.4 percent in March, but is down 8 percent from the same time last year. Overall, total construction spending – which includes nonresidential and residential construction – grew 1.4 percent in March, but is 6.7 percent lower compared to the same time last year.

“The transition from publicly financed activities to privately financed ones continues,” said Associated Builders and Contractors Chief Economist Anirban Basu. “In contrast to the trends of the past year, construction related to lodging, office and manufacturing was up in March, an indication that the economic recovery that began in mid-2009 is finally beginning to influence the nation’s nonresidential construction sector.

“Of course, skeptics are likely to point out that observed improvement in construction volumes between February and March may largely be a reflection of seasonal factors rather than economic ones,” said Basu. “It is true that February’s harsh winter conditions in much of the nation were not conducive to ongoing construction and that at least part of the monthly recovery is related purely to the weather.

“However, despite the recent uptick in privately financed construction, publicly financed construction continues to remain strong. One year ago, publicly financed construction represented 51.4 percent of total nonresidential construction spending. In March 2011, that proportion stood at 53.4 percent, slightly down from February’s corresponding statistic of 53.9 percent,” Basu said.

“It’s important to note that after recent declines in healthcare-related construction spending, healthcare construction was up in March and power-related construction expanded for two consecutive months. The expectation is that privately financed construction volumes will continue to rebound gradually into the summer even as certain publicly financed construction segments, such as public safety and education, will experience diminished spending,” said Basu.

To view the previous spending report, click HERE.