Non-Residential Construction Spending Shows Slight Boost in April

Private non-residential construction spending increased 1.7% in April for the first time since March 2009

For the first time since March 2009, private non-residential construction spending increased 1.7% in April, according to a report by the U.S. Census Bureau in early June. However, on a year-over-year basis, private non-residential construction spending is down 24.6%. Total non-residential construction is up 2% for the month, the second consecutive monthly increase. Since April 2009, however, total non-residential construction spending is down 16.1%, and now stands at $596.9 billion (click here to see Chart).

Twelve of 16 non-residential subsectors posting increases in April 2010 include conservation and development (up 9.5%); water supply (+8%); communication (+7.3%); and amusement and recreation-related construction (+6.7%). Transportation (+17.7%), conservation and development (+10.4%), and highway/street (+5%) have also shown increases since April of last year.

“Today's report represents a reversal of numerous trends,” says Associated Builders and Contractors' Chief Economist Anirban Basu. “In recent quarters, non-residential construction spending has been fueled by publicly financed projects, many of them in the transportation category. However, in April, transportation-related spending was essentially flat, an indication that the impact of stimulus spending in that category may have peaked, and other non-residential construction segments will need to expand if the overall construction industry's momentum is to continue.”

Residential construction spending was up 4.5% for the month and 4.6% higher from April 2009 levels. Public construction was up 2.4% for the month, but down 4.4% compared to April 2009. Overall, total construction spending, which includes both residential and nonresidential, was 2.7% higher in April 2010, making it the third consecutive monthly increase. Despite this gain, this was down 10.5% compared to the same period a year ago.

According to Basu, although generally upbeat, this report reveals several vulnerabilities. “Conventional wisdom suggests that state and local government-financed construction will decline going forward as lower levels of government seek to shrink their collective balance sheets,” says Basu. “This is consistent with observed monthly declines in spending in the education and public safety categories. Privately financed construction also remains generally weak, with lodging-related construction down approximately 60% on a year-over-year basis. This indicates that the construction industry has a way to go before fully recovering to activity levels seen before the economic downturn.”

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