Nonresidential construction spending increased 1.9% from March to April and is up 25.3% compared with April 2022, according to Associated Builders and Contractors.
For public construction, spending increased 1.1% for the month and is up 16.8% year-to-date. Private nonresidential spending rose 2.4% from March to April and is up 31.2% year-to-date. Spending was up for the month in 13 of the 16 nonresidential subcategories.
“What recession?” said ABC Chief Economist Anirban Basu. “Despite a slew of headwinds, including higher interest rates, prominent bank failures, a near-miss debt ceiling crisis and pervasive fears of recession, money continues to flow into the U.S. nonresidential construction segment. Manufacturing-related construction spending growth continues to lead the way, but even segments that had been weak such as lodging are picking up steam.”
Basu said contractors are complaining about labor and skills shortages in the context of needing to meet strong demand.
“It appears that the optimism that ABC contractors have been expressing about their prospects is proving justified,” Basu said. “Backlog is stable and there is still evidence of significant pricing power, helping to support contractor profit margins. Moreover, public construction spending stands to remain strong even if the economy enters recession later this year, with considerable sums of money lined up to drive road, bridge and other work during the years ahead.
“While 2023 appears to be a solid year of growth for the nonresidential construction industry, 2024 remains far less certain,” Basu continued. “The combined impacts of growing weakness in consumer spending, tightening credit conditions, lag effects associated with prior Federal Reserve rate increases and uncertainty stemming from high-stakes elections could eventually catch up to the broader economy and certain construction segments.”