Still recovering its health, the U.S. construction market has been purring for so long that the roar it made this March may not have been as loud and as emphatic as previous exclamations, but the signs remain healthy nonetheless, both for our industry and the U.S. economy.
Let’s look at the numbers. Activity in March climbed 0.3% to achieve levels not seen since October 2007, according to data by the U.S. Census Bureau. In year-over-year comparisons, spending rose by 8.3%, to $695.7 million.
In all, eight of 16 non-residential construction sectors logged monthly spending growth in March and 12 are up in year-over-year comparisons.
However, overall non-residential construction declined 0.4% from the previous month.
“Viewed optimistically, one can conclude non-residential construction has stabilized at a high level,” Anirban Basu, chief economist with Washington, D.C.-based Associated Builders and Contractors, noted in a statement. “While the last several months have failed to deliver significant spending growth, many contractors indicate they remain busy and that backlog levels are satisfactory,” he said. “Still, one might have expected better spending growth performance given the combination of steady job growth nationally, large sums of capital coming from abroad and and invested in the U.S., and surprisingly low interest rates.”
This monthly report from Basu also marks his first as chief economist fro Procore Technologies, which last month launched its first U.S. Construction Health Index.
Among the soft spots is public spending, with education, water, sewer, power, transportation and public-safety sectors all logging declines between February and March.
Lack of significant growth in non-residential spending in recent months has hindered GDP growth, which grew by a meager 0.5% in the first quarter. Basu said.
A paper published by investment research and analytics enterprise Market Realist indicated that first-quarter construction spending was “flat at 6.2%. This has been a big rise from a year ago when it stood at 5.7%. Over the past 50 years, the average has been closer to 8.4%” The culprit? Continued fall out from the housing bubble burst.,the paper contends.
Nevertheless, a more optimistic Ken Simonson, chief economist with Arlington, Va-based Associated General Contractors of America, noted in a statement that strong year-over-year growth suggests “Construction should be a significant contributor to economic growth in the remainder of 2016 and beyond. Right now the biggest challenge for contractors in many parts of the country is that they are worried about finding enough qualified workers to meet demand.”