According to an analysis of U.S. Census Bureau data published April 1, the Associated Builders and Contractors (ABC) reported that construction spending fell 1.8 percent in February, but is up 2.5 percent compared to the same time last year. On a seasonally adjusted annualized basis, spending totaled $795.1 billion for the month.
Private nonresidential spending declined 2 percent on a monthly basis and is down 0.7 percent compared to February 2019. Public nonresidential construction spending was down 1.5 percent for the month, but is up 7.2 percent on a year-over-year basis.
“Data characterizing the economy prior to the coronavirus outbreak continues to trickle in,” says ABC’s chief economist Anirban Basu. “While nonresidential construction spending declined in February, according to today’s data release, the decline was modest and overall performance was not substantially different from prior months.”
With communities in Massachusetts, Pennsylvania, California and elsewhere recently shutting down certain construction projects and economic activity generally grinding toward a halt, Basu says the construction spending data will undoubtedly deteriorate further and faster during the months to come
“Unfortunately, that is not where the pain will end,” says Basu. “Once the crisis is over, hotel chains will be weaker financially, more storefronts will be empty and fewer employers will be interested in relocating to high-end office space, which will result in diminished demand for nonresidential construction services even after the broader economy comes back to life.”
Given growing liquidity and solvency problems spreading through the economy, it is quite likely that many construction projects presently on the drawing board will be postponed or canceled, Basu adds.