Nonresidential construction spending decreased 0.8% from February to March but is up 5.6% compared with March 2021, according to www.abc.org.
For public construction, spending decreased 0.3% for the month but is up 1.7% year-to-date. Private nonresidential spending fell 1.2% from February to March and is up 8.5% year-to-date.
“March’s construction spending numbers aren’t adjusted for inflation and are actually worse than they look,” said Associated Builders and Contractors Chief Economist Anirban Basu. “While overall construction spending rose 0.1% in March, largely because of the strength in multifamily residential construction, construction spending was down in real terms. Nonresidential construction performance declined because of weakness in segments like commercial (-1.9%) and amusement/recreation (-2.1%).
“Even though nonresidential construction spending levels are significantly short of what they were pre-pandemic, many contractors indicate that they are operating at capacity, according to ABC’s Construction Backlog Indicator,” Basu continued. “This speaks to how challenging the economic environment is becoming, with contractors wrestling with workforce skills shortages and sky-high materials prices. The elevated cost of construction service delivery helps explain why more projects are not moving forward as project owners are forced to wait.”
Basu said there could be relief and challenges for contractors during the coming months.
“The Federal Reserve’s stepped-up efforts to combat inflation will eventually translate into better pricing for key construction inputs,” he said. “However, those same efforts will soften the economy. Many economists believe that a recession in America over the next 12 to 18 months has become virtually inevitable. Thus, even as delivering construction services becomes more affordable, demand for construction services, particularly private construction, may begin to fade.”