Nonresidential construction spending decreased 0.6% from April to May but is up 1% compared with May 2021, according to www.abc.org.
For public construction, spending decreased 0.8% for the month and is down 2.7% year-to-date. Private nonresidential spending fell 0.4% from April to May but is up 3.7% year-to-date. Spending was down for the month in 10 of the 16 nonresidential subcategories.
“Many contractors continue to report that they are operating at capacity despite a lack of strong nonresidential construction spending recovery,” said Associated Builders and Contractors Chief Economist Anirban Basu. “That juxtaposition provides solid evidence that the supply side of the U.S. economy remains heavily constrained by worker shortages, domestic and global supply chain disruptions and resulting high prices.
“Since the early months of the pandemic, contractors have reported that they are able to pass along their cost increases to project owners, according to ABC’s Construction Confidence Index,” Basu continued. “But there are growing concerns among industry leaders that the ability to pass along cost increases will dissipate during the months ahead as financial conditions tighten and confidence in economic performance wanes.”
Basu said slower inflation is key to sustaining nonresidential construction’s recovery.
“As long as inflation remains elevated, monetary policy will continue to tighten and project owners will be less willing to move forward with projects in an effort to preserve cash,” Basu said. “Unfortunately, ongoing efforts to limit inflation are likely to result in recession or at least further economic slowing, which will create additional issues for many contractors. However, less inflation and more favorable construction materials prices would create a foundation for renewed construction spending vigor.”
