According to one, national non-residential spending fell 0.6% in May Associated builders and contractors Analysis of data released today by the US Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending this month totaled $832.5 billion.
Expenditure declined in 10 of the 16 non-residential subcategories on a monthly basis. Private non-residential construction spending fell 0.4%, while public non-residential construction spending fell 0.8% in May. Non-residential spending has increased by 1.0% over the past year, although spending has fallen in 10 out of 16 categories over the period. The best-performing sector is manufacturing, a segment where construction spending rose 26.3% year over year.
“Many contractors continue to report that they are stretched to capacity despite the lack of a strong recovery in non-residential construction spending,” ABC chief economist Anirban Basu said. “This comparison is solid evidence that the supply side of the US economy remains severely constrained by labor shortages, domestic and global supply chain disruptions and the resulting high prices.
“Since the early months of the pandemic, contractors have reported being able to pass on their cost increases to project owners Construction Confidence Index by ABC‘ Basso said. “But there is growing concern among industry leaders that the ability to pass on cost increases will weaken in the coming months as financial conditions tighten and confidence in economic output wanes.
“A primary implication is that contractor margins could be squeezed in the future, and there is mounting anecdotal evidence that this is already happening,” Basu said. “There is also a growing risk of a significant number of project delays in both the private and public construction segment due to high material prices and labor costs.
“The key to supporting the non-residential construction recovery will be slower inflation,” Basu said. “As long as inflation remains high, monetary policy will continue to tighten and project owners will be less willing to push projects to save money. Unfortunately, ongoing efforts to contain inflation are likely to result in a recession or at least another economic slowdown, which will pose additional problems for many contractors. However, lower inflation and cheaper building material prices would create the basis for new construction investment dynamics.”