National nonresidential construction spending rose 2.4% in January, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data released today. At a seasonally adjusted annualized rate, nonresidential spending totaled $762.5 billion for the month, an increase of 4.8% over the previous year. Public nonresidential construction spending expanded 4.9% in January and private spending increased 0.8%. Both public and private nonresidential spending are up 8.5% and 2.4%, respectively, on a yearly basis.
“An uptick in investment in certain infrastructure categories has been at the center of the ongoing nonresidential construction spending cycle,” said ABC Chief Economist Anirban Basu. “During the past year, construction spending has increased at rapid rates in conservation and development, highway and street, and transportation. While there has been much discussion about expanding infrastructure investment at the federal level, most of that investment has taken place at a state and local level, especially as government finances have improved in much of the nation, therefore supplying more support for infrastructure outlays. Significant job growth also has helped bolster income tax collections while rising real estate values have triggered improved property tax collections.
“Meanwhile, still reasonably strong consumer spending has helped support growing construction in segments like lodging,” said Basu. “Construction of data and fulfillment centers also has created demand for nonresidential construction services. The recent moderation in construction materials price increases has helped support construction starts because more developers and their financiers are concluding that new projects make business sense.
“While there has been some reduction in business and consumer confidence, the nonresidential construction spending cycle remains firmly in place for now,” said Basu. “Despite the recent dip in ABC’s Construction Backlog Indicator, backlogs remain sufficient to support solid nonresidential spending activity through the balance of 2019. And while many economists remain concerned about economic prospects in 2020 and beyond, nonresidential construction’s outlook remains benign at least into 2021.”