Dive brief:
- National nonresidential construction spending rose 0.4% in August to a seasonally adjusted annualized base of $1.09 trillion, according to a new analysis by the Associated Builders and Contractors.
- The jump marks the third straight month of modest growth, and manufacturing construction remains the industry’s driver, the report said.
- “Aggregate non-residential construction spending expanded at a respectable pace in August,” said Anirban Basu, ABC’s chief economist. “But projects related to industry and the public sector accounted for more than 100% of the monthly increase. Privately financed commercial and educational construction spending declined by nearly 1%, at least in part due to higher borrowing costs.”
Diving knowledge:
Spending levels remained mostly positive among large nonresidential segments, according to the Associated General Contractors of America’s construction spending report.
Manufacturing-related spending continues to lead the way, rising 1.2% in August, the report said. Spending on energy, roads and streets, offices and healthcare construction also rose 0.4% in August, according to the report.
“At the moment, all types of construction are growing,” said Ken Simonson, AGC’s chief economist. “But unless the supply of skilled workers increases, many projects are likely to be delayed.”
Commercial construction, which includes warehouse and retail projects, fell 0.9% in August from a month ago, the AGC report said. That slowdown stems in large part from high interest rates, Basu said.
However, contractors remain relatively optimistic despite high interest rates and continued weakness in certain segments such as office and retail, Basu said. But even with high material costs and labor shortages, Basu added that many contractors still expect their profit margins to increase over the next six months.
Spending rose monthly in 12 of 16 non-residential subcategories, led by a 1.2% jump in manufacturing projects, according to ABC. Non-residential private spending rose 0.3%, while non-residential public spending rose 0.6%.
