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Dive brief:
- The story of the construction of two markets continued in May, as public projects got increased dollars while private jobs struggled to find funding, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data.
- Overall, domestic nonresidential spending was flat in May, falling 0.1% to a seasonally adjusted annualized rate of $1.21 trillion. But private non-residential spending fell further, 0.3%, as public projects gained 0.4%. This boost from the public side kept the broader non-residential sector up for the year with a 6.2% gain.
- “Non-residential construction spending has fallen for two consecutive months, but remains just 0.2% below the all-time high reached in March 2024,” ABC chief economist Anirban Basu said in a press release. “Much of this progress is attributable to ongoing infrastructure investment, which spurred a sizeable 0.4% increase in publicly funded non-residential spending in May.”
Diving knowledge:
how has it been the case of the last 24 monthspublic dollars from the $1.2 trillion Infrastructure Investment and Jobs Act, as well as follow-on legislation like the $52 billion CHIPS and Science Act, are shoring up the sector as a whole .
In fact, spending on public projects rose 9.6% over the year, while private spending grew at less than half that rate.
“Private non-residential spending has lagged and, after falling 0.3% in May, rose only 4.1% year-on-year,” Basu said. “This weakness may be linked to interest rate-sensitive segments such as office and commercial, which have also been hampered by altered demand dynamics in the wake of the pandemic.”
Still, while these figures show a widening gulf between the public and private markets in non-residential construction, total construction spending, which includes residential buildings, rose 6.4% over the year. This far exceeds the seasonally adjusted annual growth rate of 1.7% Federal Reserve estimate for the overall economy on July 1.
Spending decreased monthly in 9 of the 16 non-residential subcategories. Religious buildings saw the biggest drop, down 2.9%, while educational projects fell just 0.2%. The construction of entertainment and recreation was flat.
Over the past 12 months, the big winner has been public safety, which has seen spending increase by 29.9%. The sector with the biggest drop is commercial construction, the heart of the private non-residential category, down 13% year-over-year.
Despite these category setbacks, and perhaps buoyed by continued strength in public construction spending, ABC said its members have a positive outlook for the future, with most contractors expecting their sales to increase over the next six months
However, one area of private projects continues to stand out. According to the Associated General Contractors of America, Data center construction up 69% in the last 12 months. The AGC had advocated that the Census Bureau remove data centers from the general office sector, which the agency did.
“The Census Bureau today responded to requests from the association and others to show data centers separately from the general category of private offices,” said Ken Simonson, the association’s chief economist , in a press release. “While the overall category was down just 1.7% over the past 12 months, that total hides a 69% jump in data center construction, which nearly offset an 18.5% drop in spending in real private offices.”