Nonresidential Construction Spending Falls 1.6 Percent in February

"If it wasn’t for the mild winter, construction spending would have fallen even more sharply in February." —ABC Chief Economist Anirban Basu.

In a clear indication that the construction industry continues to feel the effects of the nation’s economic woes, total nonresidential construction spending fell 1.6 percent in February to a seasonally adjusted annual rate of $555.4 billion, according to the April 2 report by the U.S. Census Bureau. However, total nonresidential construction spending is up 6.4 percent from one year ago.

Private nonresidential construction spending decreased 1.6 percent for the month, but is up 14.5 percent year over year. Public nonresidential construction spending fell 1.7 percent for the month and is down 0.7 percent compared to February 2011.

Twelve of the sixteen nonresidential construction subsectors experienced decreases in spending for the month, including amusement and recreation, down 3.9 percent; lodging, 3.2 percent lower; water supply, down 2.8 percent; highway and street, down 2.7 percent; and commercial, 2.6 percent lower. Subsectors posting the largest decreases in year-over-year spending include conservation and development, down 24.6 percent; lodging, 9.4 percent lower; religious, down 9.4 percent; water supply, down 7 percent; and transportation, down 5.5 percent.

In contrast, four of the sixteen nonresidential construction subsectors posted increases for the month, including religious, up 2.7 percent; manufacturing, 2.2 percent higher; public safety, up 0.9 percent; and sewage and waste disposal, up 0.5 percent. Eight subsectors have experienced gains in spending during the past twelve months, including manufacturing, up 40.3 percent; power, 22.1 percent higher; public safety, up 11.4 percent; health care, 7.7 percent higher; and commercial, up 5 percent.

Residential construction spending was unchanged for the month and is 4.6 percent higher compared to the same time last year. Overall, total construction spending – which includes both nonresidential and residential – was down 1.1 percent in for the month, but is 5.8 percent higher than February 2011.

“While the nation’s economy has been improving since last September, Associated Builders and Contractors’ (ABC) Construction Backlog Indicator (CBI) accurately predicted construction activity would suffer a lull during the early months of 2012,” said ABC Chief Economist Anirban Basu.

“ABC’s CBI declined during last year’s fourth quarter, largely due to the soft patch that emerged economy-wide early last year,” Basu said. “The combination of rising commodity and input prices, along with the debt ceiling issues that plagued the nation last year, weakened financing availability and demand for design services, which is now translating into diminished construction activity.

“Last year’s soft patch likely impacted construction activity more than the data reflect,” said Basu. “If it wasn’t for the mild winter, construction spending would have fallen even more sharply in February.

“Overall, the outlook for construction is generally positive,” Basu said. “Unless there is another hiccup in the nation’s economic momentum, construction spending data will come to reflect the improvement in the broader economy that observers noted during the past half year.”