Nonresidential Construction Spending Fall Off In December

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According to an Associated Builders and Contractors study of Census Bureau statistics, national nonresidential construction spending will fall 0.7 percent in December 2021.

Nonresidential spending for the month reached $820.7 billion on a seasonally adjusted annualized basis.

Monthly spending was lower in 11 of the 16 nonresidential subcategories.

Private nonresidential spending was almost steady in December, while public nonresidential construction spending fell 1.6 percent.

Nonresidential building spending was up 3.9 percent year on year. Residential construction spending increased by 14.7 percent throughout that time period.

“Much of the increase in nonresidential construction spending is attributable to inflationary pressures, not actual increases in physical output,” said Anirban Basu, ABC Chief Economist.

“The fact that nonresidential spending was down in December despite rising labor costs and elevated materials prices does not bode well for near-term profitability.”

“A few segments continue to create a disproportionate share of contractor opportunities.”

“Among those are the commercial segment, which includes the construction of fulfillment centers and manufacturing, a segment in which construction spending has expanded more than 30% during the past year.”

“Residential construction also continues to be a hot spot in an environment characterized by a scant inventory of unsold homes and rapidly rising rents, and the strength of multifamily construction is arguably one of the most surprising aspects of the economic recovery.”

“Overall, contractors remain confident about the next six months, according to ABC’s Construction Confidence Index.”

“Public construction was responsible for much of the weakness in December,” says Anirban Basu.

“The expectation among many is that, as infrastructure monies begin to flow, the second half of the year will be better than the first.”

“It is possible that infrastructure dollars will not begin to forcefully affect the marketplace until 2023. Time will tell.”

Phil is one of our main correspondents based out of Providence, Rhode Island.