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March 1, 2024 - 1:00pm

Key Takeaways


Press Release from Associated Builders and Contractors: ABC: Nonresidential Construction Spending Falls Sharply in January

WASHINGTON, March 1—National nonresidential construction spending decreased 0.4% in January, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.190 trillion.

Spending was down on a monthly basis in 10 of the 16 nonresidential subcategories. Private nonresidential spending fell 0.1%, while public nonresidential construction spending was down 1.0% in January.

"Nonresidential construction spending fell sharply in January, ending a 19-month streak of monthly gains," said ABC Chief Economist Anirban Basu. "Some of this decrease is due to weather-related factors. That’s especially true in infrastructure categories like highway and street and water supply, both of which exhibited steep declines in spending to start the year but should remain elevated through 2024."

"Construction spending in the manufacturing category, on the other hand, continued to surge in January," said Basu. "Manufacturing now accounts for nearly $1 of every $5 of nonresidential construction spending."

"Despite January’s disappointing data, nonresidential construction spending is still up more than 17% over the past year," said Basu. "Given that year-over-year strength and the fact that a majority of contractors expect their sales to increase over the next six months, according to ABC’s Construction Confidence Index, spending is likely to rebound over the coming months."


 

Press Release from Associated General Contractors of America: Construction Spending Dips 0.2 Percent In January With Mixed Results For The Month But Increases Year-Over-Year Among All Project Categories

Severe January Weather May Have Slowed Infrastructure Work, Outweighing Recovery in Single-Family Homebuilding and Continuing Strong Demand for Manufacturing Plants

Total construction spending slipped from December to January amid widespread severe weather, but outlays climbed strongly compared to January 2023, with year-over-year gains in every category, according to an analysis of a new government report that the Associated General Contractors of America released today. Association officials noted, however, that some construction segments appear to be impacted by broader economic conditions.

"The dip in January is more likely due to bad weather than to weakening demand overall," said Ken Simonson, the association’s chief economist. "But high financing costs and falling rents are dragging down income-dependent sectors like warehouse and retail construction, while single-family homebuilding and manufacturing remain solid."

Construction spending, not adjusted for inflation, totaled $2.102 trillion at a seasonally adjusted annual rate in January. That figure is 0.2 percent below the upwardly revised December rate, but 11.7 percent above the January 2023 level.

Spending on private residential construction gained 0.2 percent for the month and 5.2 percent year-over-year. Single-family construction climbed 0.6 percent from December, the ninth-straight increase. Spending on multifamily projects, which has trended down since August, declined 0.4 percent in January.

Spending on private nonresidential construction inched down 0.1 percent in January but rose 15.2 percent from January 2023. The largest segments were mixed. Manufacturing construction rose for the seventh month in a row, by 2.0 percent. Commercial construction slumped 3.3 percent as warehouse, retail, and farm components each declined. Investment in power, oil, and gas projects rose 0.3 percent. Spending on private offices and data centers edged up 0.1 percent, while health care construction fell 0.2 percent.

Public construction spending decreased 0.9 percent for the month but jumped 20.1 percent from a year earlier. Spending on segments most exposed to severe weather declined: highway and street construction fell by 2.1 percent in January, sewage and waste disposal by 1.0 percent, water supply spending by 1.4 percent, and conservation and development outlays by 0.9 percent. Public outlays for educational structures declined 0.7 percent, while public spending on transportation facilities rose 1.4 percent.

Association officials urged federal leaders to take steps to accelerate new infrastructure investments. For example, they are calling on the Biden administration to reform its approach to implementing new Buy America, Build America rules to avoid the confusion and delays that are currently holding up projects.

"Federal investments in construction and infrastructure are likely to remain the largest driver of demand as long as private-sector finance costs remain high," said Stephen E. Sandherr, the association’s chief executive officer. "Eliminating needless confusion and delay in approving federal projects will keep construction demand, and employment, strong for the foreseeable future."

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