Construction Economics
Construction Spending Falls in February, But Remains Up From Year Earlier
Nonresidential construction spending fell in February but remained 14% higher than a year earlier.
Photo by Michael Maddox/U.S. Army Corps of Engineers Louisville District
Nonresidential construction spending slipped by 1% in February, but still remained up more than 14% compared with a year earlier, according to U.S. Census Bureau data released April 1. The drop from January included decreases in 15 out of 16 segments.
Despite the overall decline for the month, economists say the spending downturn may be temporary. With spending in every segment still up compared with a year earlier, “the current downturns may reflect short-term challenges such as severe weather, not fading demand,” Ken Simonson, chief economist with the Associated General Contractors of America, said in a statement.
Anirban Basu, chief economist at the Associated Builders and Contractors, says the decline could be an impact of elevated interest rates, but he also noted the overall increase compared with a year earlier and pointed to ABC’s Construction Confidence Index, which shows most surveyed contractors expect sales to remain flat or increase slightly over the next six months.
The value of nonresidential construction put in place in February totaled a seasonally adjusted $1.03 billion, according to the data. The sharpest decline was in health care spending, which fell by 2.2%, followed by commercial with a 1.9% drop and water supply spending, 1.8%.
Transportation was the only segment with an increase for the month, of 0.7%, according to the data.
Private nonresidential construction was down 0.9% in February, compared to a 1.2% decline for public nonresidential construction. But compared with a year earlier, private was up by 12.6% and public was up 16.8%.
Chart courtesy of Associated Builders and Contractors with U.S. Census Bureau data“The optimist will likely shrug off both the January and February nonresidential construction spending declines as merely reflecting winter weather,” Basu says. “The pessimist will proclaim this release a wake-up call to contractors and an indication that higher interest rates have finally begun to make their mark.
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“As always, interpreting the data is complicated," he adds.
U.S. Census Bureau officials note that month-to-month changes in seasonally adjusted statistics may show irregular movements, and it can take between two and eight months to establish a trend, depending on the segment.
