National nonresidential construction spending was virtually unchanged in October, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted, annualized basis, spending totaled $792.4 billion for the month.
Of the sixteen nonresidential subcategories, nine were down on a monthly basis and nine were down on an annual basis. Private nonresidential spending fell 0.7%, while public nonresidential construction spending was up 1.0% in October.
“Excluding some of the emergency construction, such as temporary expansions to healthcare capacity, that transpired in October due to increasing cases of COVID-19, nonresidential construction spending actually declined for the month,” said ABC Chief Economist Anirban Basu. “Spending weakness was broad-based but was especially apparent in private construction segments, such as lodging, office and power. Construction spending in the commercial segment has remained flat on a year-over-year basis, with spending on fulfillment center construction offsetting declining demand for the construction of stores. Commercial and institutional backlog is down 1.7 months since the beginning of the pandemic, according to ABC’s Construction Backlog Indicator, suggesting that declining commercial activity will eventually become apparent within the spending data.
“The near-term outlook is tilted toward the negative as the economic momentum that has been apparent since May begins to wane,” said Basu. “A near-term recession is possible, and perhaps even probable, as shutdown measures are renewed and the impact of previously implemented stimuli continues to fade. That will further delay the recovery of construction spending.
“The longer-term outlook is decidedly more upbeat,” said Basu. “At some point, there will likely be a combination of additional stimuli (including money for infrastructure) and widespread vaccine availability. Recent announcements by Moderna, Pfizer, Astra Zeneca and others have rendered it clear that COVID-19 can be soundly defeated. It is also likely that, at some point in 2021, the economy will take off. As air travel, restaurants and theaters begin to rebound, the recovery to come may be more impressive than the recovery that has occurred over the past six months. That should set the stage for better nonresidential construction spending dynamics in 2022 and 2023.”