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Submitted by cdp-inc on June 7, 2021 - 5:36pm

Key Takeaways

Press Release from Associated Builders and Contractors, Inc.

WASHINGTON, June 1—National nonresidential construction spending declined 0.5% in April, 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 $786.2 billion for the month.

Spending was down on a monthly basis in nine of 16 nonresidential subcategories. Both private and public nonresidential construction spending were down 0.5% for the month.

“The fact that nonresidential construction spending continues to decline is no surprise whatsoever,” said ABC Chief Economist Anirban Basu. “Many factors are at work, including the historic lag between broader economic recovery and the onset of persistent recovery in nonresidential construction. In other words, nonresidential spending levels reflect what the broader economy looked like about a year ago. A year ago, the economy was in dire shape.

“There’s more,” said Basu. “Conventional wisdom holds that many of the projects postponed during the earlier stages of the pandemic are set to come back to life. It is for this reason that many contractors have reported rising backlog and growing confidence in the six-month outlook for revenues, staffing levels and profits, according to ABC’s latest Construction Backlog Indicator and Construction Confidence Index. But just when it seemed safe to get back into the water, a new set of challenges has emerged. Among these are input shortages, rapidly rising materials prices and ongoing issues securing sufficiently skilled workers. What all this has done is to suppress the vigor of nonresidential construction’s current recovery by inducing certain project owners to further delay their projects, hoping to ultimately receive more favorable bids.

“As if this were not enough, certain construction segments may have been permanently undermined by the pandemic,” said Basu. “Among these are construction of new office buildings, shopping centers and hotels that cater to business travelers. The good news is that the longer-term outlook remains upbeat given the anticipated strength of the economic recovery to come, particularly if a sensible infrastructure package manages to make its way out of Washington, D.C.”

Press Release from Associated General Contractors of America, Inc.

Nonresidential Construction Outlays Drop In April To Two-Year Low As Public And Private Work Declines Amid Supply-chain Woes, Soaring Costs

Construction Officials Say New Infrastructure Funding, Tariff Relief and Measures to Reduce Manufacturing and Delivery Delays for Key Materials Needed to Jump Start Nonresidential Activity

Nonresidential construction spending in April declined for the fifth-straight month to a two-year low as demand waned for numerous public and private project categories in the face of lengthening production and delivery times for materials, along with fast-rising prices for many items, according to an analysis of new federal construction spending data by the Associated General Contractors of America. Officials with the association urged the President and Congress to boost infrastructure investments, remove tariffs on key materials and take steps to address production and deliver backups for key construction supplies.

“Both public and private nonresidential spending overall continued to shrink in April, despite a pickup in a few spending categories from March,” said Ken Simonson, the association’s chief economist. “Ever-growing delays and uncertainty regarding backlogs and delivery times for key materials, as well as shortages and record prices, are likely to make even more project owners hesitant to commit to new work.”

Construction spending in April totaled $1.52 trillion at a seasonally adjusted annual rate, an increase of 0.2 percent from the pace in March and 9.8 percent higher than the pandemic-depressed rate in April 2020. As has been true for the past several months, the year-over-year gain was limited to residential construction, Simonson noted. That segment climbed 1.0 percent for the month and 29.5 percent year-over-year. Meanwhile, combined private and public nonresidential spending declined 0.5 percent from March—the fifth consecutive monthly decrease—and 3.9 percent over 12 months, to the lowest annual rate since December 2018.

Private nonresidential construction spending fell 0.5 percent from March to April and 4.8 percent since April 2020, with year-over-year decreases in 10 out of 11 subsegments. The largest private nonresidential category, power construction, plunged 7.1 percent year-over-year and 1.8 percent from March to April. Among the other large private nonresidential project types, commercial construction—comprising retail, warehouse and farm structures—retreated 1.3 percent year-over-year despite a gain of 0.4 percent for the month. Manufacturing construction rose 0.6 percent from a year earlier and 0.4 percent from March. Office construction decreased 1.6 percent year-over-year but edged up 0.2 percent in April.

Public construction spending slipped 2.2 percent year-over-year and 0.6 percent for the month. Among the largest segments, highway and street construction declined 2.7 percent from a year earlier, although spending rose 0.6 percent for the month. Public educational construction decreased 4.0 percent year-over-year and 0.5 percent in April. Spending on transportation facilities fell 1.9 percent over 12 months and 1.2 percent in April.

Association officials cautioned that a recent Commerce Department announcement that it intends to double the current tariff levels on Canadian lumber would further undermine nonresidential construction activity. They said the Biden administration should instead remove tariffs on lumber, steel and aluminum and work to ease production and shipping delays. Boosting infrastructure funding, which leaders of both parties have proposed, will also help, the construction officials added.

“The last thing construction workers need is for the Biden administration to double tariffs on lumber,” said Stephen E. Sandherr, the association’s chief executive officer. “Instead of making it even harder to build, the administration needs to ease supply backups, remove tariffs and pass a bipartisan infrastructure bill.”