Construction spending was unchanged from September to October and is down 3.7% compared with October 2019, according to www.abc.org.
For public construction, spending increased 1% for the month and 3.2% year-to-date. Private nonresidential spending fell 0.7% from September to October and is down 8.2% year-to-date.
“Excluding some of the emergency construction, such as temporary expansions to health care capacity, that transpired in October due to increasing cases of COVID-19, nonresidential construction spending actually declined for the month,” said Anirban Basu, chief economist for Associated Builders and Contractors. “Spending weakness was broad-based but was especially apparent in private construction segments, such as lodging, office and power. Construction spending in the commercial segment has remained flat on a year-over-year basis, with spending on fulfillment center construction offsetting declining demand for the construction of stores.
“The near-term outlook is tilted toward the negative as the economic momentum that has been apparent since May begins to wane,” Basu continued. “A near-term recession is possible, and perhaps even probable, as shutdown measures are renewed and the impact of previously implemented stimuli continues to fade. That will further delay the recovery of construction spending.”
However, Basu is more optimistic about the long term.
“The longer-term outlook is decidedly more upbeat,” Basu said. “At some point, there will likely be a combination of additional stimuli (including money for infrastructure) and widespread vaccine availability. Recent announcements by Moderna, Pfizer, AstraZeneca and others have rendered it clear that COVID-19 can be soundly defeated. It is also likely that, at some point in 2021, the economy will take off. As air travel, restaurants and theaters begin to rebound, the recovery to come may be more impressive than the recovery that has occurred over the past six months. That should set the stage for better nonresidential construction spending dynamics in 2022 and 2023.”
