Dive Brief:
- National construction spending increased 1.9% in April to a seasonally adjusted annualized basis of $1.05 trillion, according to new Associated Builders and Contractors analysis.
- That growth stems from gains in almost every nonresidential building category. Thirteen of the 16 nonresidential categories jumped in April, led by an 8.6% growth in manufacturing construction.
- “What recession?” said Anirban Basu, ABC chief economist, in the release. “Despite a slew of headwinds, including higher interest rates, prominent bank failures, a near-miss debt ceiling crisis and pervasive fears of recession, money continues to flow into the U.S. nonresidential construction segment.”
Dive Insight:
Total construction spending, which includes housing, increased 1.2% in April, according to an Associated General Contractors of America report.
That growth springs from those widespread gains across nonresidential categories, as well as strong activity in the multifamily sector, said Ken Simonson, AGC chief economist.
“[The] report shows there has been no letup in most categories of construction despite worries about tighter credit and a possible slowdown in the broader economy,” said Simonson. “The top concern for most contractors is finding qualified workers, not projects to bid on.”
Commercial construction, such as warehouse and retail, ticked up 0.7% in April, and remains up 23.7% over the past year. Highway and street construction, meanwhile, jumped 1.2% in April, and increased 21.4% year over year, noted the AGC report.
While 2023 appears to be a solid year for nonresidential construction performance, 2024 remains “far less certain,” said Basu.
That’s largely due to mounting weakness in consumer spending, tightening credit conditions, lag effects associated with prior Federal Reserve rate increases and uncertainty around U.S. elections, said Basu. Those circumstances could “eventually catch up to the broader economy and certain construction segments,” he added.
Still, Basu insisted the optimism shown by contractors continues to be justified.
“Backlog is stable and there remains evidence of significant pricing power,” said Basu. “Moreover, public construction spending stands to remain strong even if the economy enters recession later this year, with considerable sums of money lined up to drive road, bridge and other work during the years ahead.”
