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News Sept. 6, 2022

Construction spending rose in July

Nonresidential construction spending increased 0.8% from June to July and is up 3.1% compared with July 2021, according to www.abc.org.

For public construction, spending increased 1.5% for the month and is up 3.3% year-to-date. Private nonresidential spending rose 0.4% from June to July and is up 3.1% year-to-date. Spending was up for the month in 13 of the 16 nonresidential subcategories.

“The nonresidential sector continues to grapple with rising borrowing costs, elevated materials and labor costs and pervasive economic pessimism,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Despite a modest increase in July, nonresidential construction spending remains below its pre-pandemic level. There is, however, at least one bright spot for the industry: publicly financed construction. State and local governments are flush with cash, and considerable funding is slated for various forms of infrastructure. In July, spending in the highway and street category increased 4.4%, while spending in the public safety category rose 2.3%.

“For privately financed construction, circumstances could get worse before they get better,” Basu continued. “The Federal Reserve recently recommitted to further tightening monetary policy. Market sentiment quickly turned negative. Rather than disappear, supply chain challenges are proliferating in much of the world, including in Europe and China, and the risk of recession is elevated. This is simply not a set of circumstances conducive to rapid nonresidential construction spending growth, and according to the most recent Construction Confidence Index, just 31% of contractors expect their profit margins to grow over the next six months.”

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