Construction spending rose in October

December 2, 2021

Nonresidential construction spending climbed 0.9% from September to October and is up 2% compared with October 2020, according to www.abc.org.

For public construction, spending increased 1.8% for the month and is up 0.4% year-to-date. Private nonresidential spending rose 0.2% from September to October and is up 3.1% year-to-date.

Associated Builders and Contractors Chief Economist Anirban Basu said the October data are encouraging on the surface but do not adjust for inflation, and the spending gains largely can be attributed to increases in the cost of delivering construction services.

“Challenges that have suppressed nonresidential construction spending growth remain firmly in place,” Basu said. “While lofty levels of investment in real estate would normally be associated with significant private construction volumes, many project owners have been induced to postpone projects because of elevated material and labor costs, as well as widespread shortages.”

However, Basu said leading indicators remain positive.

“ABC members collectively expect revenues and employment levels to climb during the months ahead, according to ABC’s Construction Confidence Index,” Basu said. “Design work is plentiful, which means that many investors are at least considering moving forward with projects. In certain geographies, especially in the southern U.S., office and other segments are improving, which should translate into more abundant construction starts once global supply chains and materials prices normalize. In this regard, the emergence of the omicron variant adds another layer of uncertainty and may prevent certain materials and equipment prices from declining in the very near term.

“The bottom line is that 2022 should be an excellent year for nonresidential construction,” Basu continued. “Performance will be led by public construction, especially in the context of a recently passed and large infrastructure package. Among the segments that are set to zoom ahead are roads and bridges, school construction, water systems, airports, seaports and rail. Traditional office and lodging construction will likely remain weak in much of the nation, however.”

Tags: Commercial | Trends

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