Dive brief:
- Nonresidential construction spending fell 1% in February at a seasonally adjusted annual rate of $1.179 trillion, according to the Associated Builders and Contractors analysis of U.S. Census Bureau data.
- This decrease in February represents the second consecutive month of contraction in construction spending, after a 19-month streak of construction spending growthaccording to the report.
- “The optimist will likely shrug off the decline in non-residential construction spending in January and February as only reflecting winter weather,” said Anirban Basu, ABC chief economist. “The pessimist will proclaim this statement a wake-up call to contractors and an indication that higher interest rates have finally started to take their toll.”
Diving knowledge:
Fifteen of the 16 non-residential subcategories posted a monthly decline, the data showed.
For example, health expenditure fell by 2.2%, commercial expenditure decreased by 1.9% and expenditure on water supply fell by 1.8%. Meanwhile, public spending on non-residential construction fell 1.2%, while private non-residential spending fell another 0.9% in February.
However, all published categories year-on-year spending growthaccording to an analysis by the Associated General Contractors of America.
This suggests that “the current declines may reflect near-term challenges such as severe weather, undiminished demand,” said Ken Simonson, AGC’s chief economist.
For example, construction spending rose more than 10 percent in 10 categories over the past 12 months, including a 36 percent increase in public safety spending and a 32 percent increase in manufacturing construction, Basu said.
Private non-residential construction spending rose 12.6% compared to February 2023, while public construction spending grew 16.8% from a year earlier, the data showed.
ABC’s construction confidence index, which measures the outlook for contractors over the next six months, also remains positive. That means the current drop in spending could be temporary, Basu said.
“As always, interpreting the data is complicated,” Basu said. “[But] Contractors remain confident about their sales over the next six months, indicating that the data could improve over time.”
