National nonresidential construction spending declined 0.9% in May, according to an Associated Builders and Contractors' analysis of data published recently by the U.S. Census Bureau. On a seasonally adjusted annualized basis, spending totaled $812.5 billion for the month. Private nonresidential spending declined 2.4% in May, and public nonresidential construction spending increased 1.2% (see Table).
“Certain aspects of today’s data release are precisely what was anticipated, while other elements are rather surprising,” said ABC Chief Economist Anirban Basu. “For instance, the precipitous 5.3% decline in health care-related construction spending is hardly shocking, as many elective surgeries, dental appointments and wellness checkups were postponed, resulting in billions of dollars of losses among medical systems. In addition, many medical systems have experienced large-scale layoffs in an effort to preserve cash balances.”
Obviously, a lack of travel due to the pandemic has slowed hotel construction, but other markets have taken a hit as well. “A shrunken global economy and disrupted worldwide supply chains have pummeled industrial construction,” he said. “And the energy sector has taken a hit from commodity prices that remain significantly lower than pre-crisis levels, truncating demand for new construction.”
According to a press release from the organization, Basu did express surprise when it comes to the overall stability of construction spending. “In May, nonresidential construction spending declined by less than 1%, which represents a level of stability not enjoyed by much of the balance of the economy,” Basu said. “Spending in a number of categories, mostly public, was higher for the month, including highway/street, public safety, transportation and water supply. Moreover, certain construction segments may experience rapid recovery going forward, including health care, manufacturing and power. For now, construction spending data and ABC’s Construction Backlog Indicator, which stood at 7.9 months in May, show that the industry has managed to remain a bulwark of relative stability in the face of ongoing pandemic-induced economic dislocations.”
