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AGC, ABC Report Rise in Nonresidential Spending

Thursday, March 4, 2021

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According to data analyses from both the Associated General Contractors of America and the Associated Builders and Contractors, construction spending in the private nonresidential building sector posted a gain in January—a rare increase since the start of the COVID-19 pandemic.

Even though the data is overall optimistic, economists are pointing to the hike in material prices as a reason to not get excited yet.

The Data

According to ABC’s analysis of data published by the U.S. Census Bureau, nonresidential construction spending increased .9% on a monthly basis in January and totaled $799.1 billion for the month.

Spending was up on a monthly basis in nine of the 16 nonresidential subcategories, the ABC added, with private nonresidential spending increasing 0.4% in January, while public nonresidential construction spending increased 1.6%. Only four nonresidential construction categories have experienced growth in spending on a year-over-year basis (all of which are primarily publicly financed segments).

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According to data analyses from both the Associated General Contractors of America and the Associated Builders and Contractors, construction spending in the private nonresidential building sector posted a gain in January—a rare increase since the start of the COVID-19 pandemic.

“It is remarkable that overall nonresidential construction spending has stabilized recently despite the lingering impacts of the COVID-19 pandemic,” said ABC Chief Economist Anirban Basu. “January 2021’s construction spending data line up with the Construction Backlog Indicator produced by ABC, which indicates that backlog is stabilizing and that many nonresidential contractors expect both sales and staffing levels to expand over the next six months.

“There is at least one additional consideration that serves as a bit of a damper in what was an otherwise decent construction spending report for January,” said Basu. “The rise in construction spending in January could largely reflect rising materials prices and efforts by contractors to pass at least some of those increases to purchasers of construction services. It comes as little surprise that many of the contractors who expect rising sales and staffing levels during the first half of 2021 also anticipate shrinking margins.”

Stephen E. Sandherr, AGC’s CEO, echoed that sentiment: “Contractors are getting caught between rising materials prices and stagnant bid levels. Add to that the possible threat of a new era of labor unrest, and many contractors are worried that the recovery will end before it really starts.”

The AGC looked at the numbers from the construction sector as a whole, adding that January totaled $1.52 trillion, an increase of 1.7% from December and 5.8% higher than January 2020. Residential construction jumped 2.5% for the month and 21% year-over-year.

Segment breakdowns in the data include:

  • Power construction, fell 10% year-over-year and .8% from December to January;
  • Commercial construction—comprising retail, warehouse and farm structures—slumped 8.3% year-over-year and 1.8% for the month;
  • Office construction decreased 4.4% year-over-year and .2%in January;
  • Manufacturing construction tumbled 14.7% from a year earlier despite a 4.9% pickup in January;
  • Highway and street construction rose 6.5% from a year earlier and 5.8% for the month;
  • Educational construction increased .9% year-over-year but dipped .1% in January;
  • Spending on transportation facilities declined 0.6% for the year and 1.0% in January;
  • Private residential construction spending increased for the eighth-straight month, jumping 21% year-over-year percent and 2.5% in January;
  • Single-family homebuilding leaped 24.2% compared to January 2020 and 3.0% for the month; and
  • Multifamily construction spending climbed 16.9% for the year and .7% for the month.

Recent Numbers

Construction spending in December varied drastically according to last month’s analysis from AGC. The month saw downturns in almost every private category, but saw double-digit increases in residential construction. The stats underscore trends that have been shown throughout the COVID-19 pandemic.

Construction spending in December totaled $1.49 trillion at a seasonally adjusted annual rate, which was an increase of 1% from November and 5.7% higher than in December 2019. However, the gains were limited to residential construction, which rose 3.1% for the month and 20.7% year-over-year. Meanwhile, nonresidential spending fell 0.8% from November and 4.8% year over year.

Other nonresidential spending numbers include:

  • power construction fell 10.8% year-over-year;
  • commercial construction slipped 1.4% year-over-year;
  • manufacturing construction tumbled 17.6% from a year;
  • office construction declined 3.3% year-over-year; and
  • healthcare construction fell 8.7% from the year before.

Some marginal increases were noted in other areas, however, including:

  • Public construction spending increased 3% year-over-year;
  • highway and street construction rose 3.9% from a year earlier; and
  • educational construction increased 4.5% year-over-year.

The big numbers, as what has been trending, were seen in private residential construction with an increase of 20.7% year over year. Single-family homebuilding rose 23.8% and multifamily construction climbed 17.8%.

The AGC is again calling for Congress and the new Biden administration to enact new recovery measures.

December Employment Numbers

While the spending statistics were just released, employment numbers for December were analyzed last month, with the group finding that construction employment as a whole increased by 51,000 jobs in December, with gains for both the residential and nonresidential industries.

The surveys also showed, however, growing pessimism for what 2021 will bring.

“December’s employment gains likely reflect milder weather than usual for the month rather than sustained demand for projects,” said Simonson at the time. “In fact, our survey found contractors expect the volume of work is likely to decline for nearly all nonresidential project types, and most firms have experienced project cancellations or postponements.”

Construction employment came in at 7.41 million in December, an increase of .7% over November. The number remains about 3% behind the most recent peak last February.


Tagged categories: Associated Builders and Contractors Inc. (ABC); Associated General Contractors (AGC); COVID-19; Economy; Good Technical Practice; Jobs; Market data; NA; North America

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