Private nonresidential construction spending continues to slump, falling 2.5 percent in October and reaching levels 20.6 percent below those from one year ago, according to the Dec. 1 report by the U.S. Census Bureau. Total nonresidential construction spending, which includes both private and public construction, fell 1.5 percent for the month and 10.5 percent on a year-over-year basis to $652.2 billion.
“Over the course of three years, the nation’s construction industry has turned upside down,” said ABC Chief Economist Anirban Basu. “Three years ago, residential construction was entering its worst slump in generations, with housing starts collapsing and many homebuilders failing. Nonresidential construction, by contrast, was still in the midst of its growth cycle; one that would last well into 2008.”
Only four subsectors experienced increased spending in October and only two were up more than one percent. Conservation and development construction was up 18.2 percent, and religious-related construction was up 2.5 percent. Subsectors with the largest increases from October 2008 were transportation, up 7.7 percent; public safety construction, up 5 percent; and highway and street construction, up 4.6 percent.
In contrast, subsectors posting the largest decreases for the month include lodging, down 5.8 percent; communication construction, down 5.1 percent; and water supply construction, down 5.1 percent. On a year-over-year basis, lodging construction is down 45 percent, commercial construction is down 37.8 percent, and office construction is down 27.9 percent. Manufacturing construction is also down 5.9 percent on a year-over-year basis after being a bulwark of stability for many months.
“One of the most striking aspects of the construction spending report is the reversal of fortune in the category of manufacturing-related construction. This segment has been one of the primary stabilizing segments of nonresidential construction for many months, but with the slowing of refinery-related construction, that segment is now in decline. ABC predicts a significant decline in manufacturing-related construction next year,” said Basu.
“Given a still-tight credit and weak labor market, building construction is not positioned for recovery in the near term,” said Basu. “Certain forms of nonresidential construction have held up relatively well, including segments susceptible to public financing and public policy, such as highway/street construction and sewage/waste disposal-related construction. However, it remains to be seen whether those subsectors that were down for the month will continue to slide.”
Meanwhile, residential construction spending increased 4.2 percent for the month, but is still down 22.9 percent from October 2008. Total construction spending is unchanged from September and down 14.4 percent year-over-year.
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