- National construction spending on non-residential buildings increased by 0.9% monthly in January 2021, but has decreased by 5% since January 2020 Analysis of associated builders and contractors from data released yesterday by the US Census Bureau. On a seasonally adjusted annual basis, non-residential spending for the month was $ 799.1 billion.
- Spending increased monthly in nine out of 16 non-residential subcategories. Private spending on non-residential buildings rose 0.4% in January, while public construction spending on non-residential buildings rose 1.6%.
- However, only four non-residential construction categories have seen year-over-year increases in spending, which, according to ABC, are primarily publicly funded segments. These are motorway and road, public safety, water supply, and sewage and waste disposal.
The new numbers match the ABCs Construction backlog indicatorThis suggests that the backlog is stabilizing and that many non-residential contractors expect both sales and headcount to grow over the next six months.
“It is noteworthy that overall non-residential construction spending has stabilized recently despite the ongoing impact of the COVID-19 pandemic,” said Anirban Basu, ABC’s chief economist.
The sectors where spending increased compared to last month were:
- Conservation and Development (6.3%)
- Motorway and road (5.8%)
- Manufacturing (4.7%)
- Public safety (1.5%)
- Health care (1.1%)
- Communication (1.1%)
- Entertainment and recreation (0.8%)
- Water supply (0.6%)
- Accommodation (0.5%)
- Education (0%)
There are a few important caveats, however, he said. For example, construction spending in the lodging segment fell nearly 23% over the past year, and office construction spending fell both monthly and annually. In addition, the future of remote working, business travel and stationary retail is still uncertain, so construction spending in a large number of private categories is likely to remain low for the foreseeable future.
Despite the seemingly good news for builders, Basu warned that the rise in construction spending in January could be largely due to rising material prices and efforts by builders to pass on at least some of those increases to construction buyers, Basu said.
Steel and lumber price increases of up to 25% have resulted in contractors revising the cost of materials for their work in recent weeks. The price hikes are affecting other materials as well, and the cost of drywall, copper, steel studs, and even vinyl siding is increasing.
“It’s no surprise that many of the contractors who expect sales and headcount increases in the first half of 2021 are also expecting margins to decline,” he said.