Nonresidential construction spending decreases for first time in almost a year

Nonresidential construction spending has fallen for the first time in nearly a year.

National nonresidential construction spending fell 0.2% in May to a total of $1.06 trillion, according to U.S. Census Bureau data published on Monday.

An Associated Builders and Contractors‘ analysis of the numbers showed spending fell monthly in nine of 16 nonresidential subcategories. Private nonresidential spending fell 0.3% and public nonresidential construction spending increased 0.1% in May, ABC officials said.

May’s spending decline ended an 11-month streak of monthly increases, Anirban Basu, chief economist for ABC, said in a statement.

“While spending is up more than 17% over that span, manufacturing-related construction has accounted for the majority of that increase. Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6% over the past year,” Basu added.

An ABC analysis said contractors were “relatively upbeat” and manufacturing projects and public finance justified the confidence, Basu said, noting however interest rates are high and are likely to rise once again during the rest of the year.

“Contractors remain relatively upbeat, according to ABC’s Construction Confidence Index, and ongoing strength in manufacturing and publicly financed segments justifies that confidence. Unfortunately, conditions may prove challenging in other segments over the next few quarters. Interest rates remain elevated and are likely to rise at least once more over the second half of 2023, exacerbating already tight credit conditions and ultimately limiting construction activity,” Basu added.