Residential gain offset by non-residential loss in August Construction spending


data: US Department of Commerce; graphic:

The divergent stories of US spending on residential and non-residential construction continued in August, with a sixth month of increase in the value of homes put in place and a further decline on the non-residential side. Total construction spending, according to monthly data released by the US Census Bureau, held steady during the month as a 1.0% drop in non-residential spending offset a 0.4% gain in residential spending. . Economists polled by Reuters predicted a 0.3% increase in construction spending.

“The monthly gain in residential [construction spending] was due almost entirely to a 2.5% increase in home improvement spending, ”said Charlie Dougherty, economist at Wells Fargo Securities. Spending on private single-family dwellings fell 0.7% and spending on multi-family dwellings by 0.8%. “More time spent at home, lower interest rates, an increase in home equity and the shortage of homes available for sale have led to an increase in repair and renovation activity. “

Since the start of the year, residential construction spending is 25.8% higher than in the first eight months of 2020.

Nores much worse than 2020

The 0.4% drop in total non-residential construction spending in August brought this segment to 6.7% less since the start of the year than in 2020.Click on this table for a larger viewClick on this table for a larger viewdata: US Department of Commerce; graphic:

Spending for August fell in 10 of 16 non-residential subcategories, with transportation spending unchanged for the month. Private non-residential spending fell 1.0%, while government non-residential construction spending rose 0.5% in August.

“Data on non-residential construction spending is among the most interesting to watch as the economy continues to grapple with COVID-19, supply chain disruptions and widespread uncertainty about where the market is going. federal policy making, ”said Anirban Basu, chief economist of Associated Builders and Contractors. “First, the dynamics of non-residential construction spending are shaped by all of the major forces shaping economic performance today, including labor shortages, soaring input prices, massive liquidity and confidence. flickering.

“Second, despite the many challenges they faced, contractors continued to express confidence in the near-term outlook until recently, according to ABC’s Construction Confidence Index,” Basu said. “For economists, who have focused on such phenomena as increasing asset price volatility, rising freight costs, ongoing lockdowns in parts of the global economy, and continued high infection rates in America, this expression of abundant confidence was somewhat surprising. Today’s data release reminds us that challenges abound, with the trajectory of the non-residential segment remaining on a downtrend that has now been in place for several months.

“Third, a growing number of contractors are indicating that the combination of increasingly expensive labor and rising material prices are causing more project owners to postpone work,” Basu said. “This has manifested itself in several ways, including the inability of non-residential construction spending to achieve growth and a recent decline in the backlog as measured by ABC’s construction backlog indicator. As if that weren’t enough, a bipartisan infrastructure package that seemed poised to be adopted is now compromised by a muddled political dynamic. “

Hints on a turnaround

“The [American Institute of Architects’] The architectural billing index, which leads non-residential construction spending by roughly a year, rose to 55.6 in August, ”Wells Fargo’s Dougherty said. “The index has now been in expansion territory (over 50) for seven straight months, suggesting that non-residential activity is expected to strengthen over the next few years.”

The public sector accounts for about 45% of non-residential spending, however, and Associated General Contractors officials said on the day a House vote on the infrastructure bill was postponed again that the nearly universal drop in infrastructure spending demonstrates the urgency of expanding infrastructure. funding. They called on the House of Representatives to swiftly pass the bipartisan infrastructure bill that has already been passed by a large majority in the Senate.

“This legislation includes the kind of political priorities that members of both parties have long claimed to support,” said Stephen E. Sandherr, the association’s chief executive. “There is no excuse to hold these projects hostage while sorting out other priorities. Construction workers, businesses and the public all lose out because of the delay in passing this law. ” Aug2021 Construction spending in the United States Public Privatedata: US Department of Commerce; graphic:

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