Dive Brief:
- Nonresidential construction spending dipped 0.4% in October to a seasonally adjusted annual rate of $1.23 trillion due to the impacts of hurricanes Helene and Milton in late September and early October, according to an Associated Builders and Contractors’ analysis of U.S. Census Bureau data released Monday.
- Total construction spending increased in October, but hurricane recovery efforts skewed figures. Public nonresidential spending fell 0.5%, while private nonresidential spending dipped 0.3%.
- The decline reflects ongoing challenges in nonresidential construction, but optimism for a rebound persists as storm impacts subside and contractors anticipate higher sales in the months ahead, according to ABC.
Dive Insight:
The drop in nonresidential construction spending reflects disruptions from the storms and ongoing economic pressures weighing on private sector activity, said Anirban Basu, ABC chief economist.
“The storms stalled work on several projects in North Carolina and Florida and initiated a massive increase in residential repair work,” said Basu in the release. “Construction of new housing units is actually down slightly over the past year, while spending on renovations and repairs is up by a robust 18.5%.”
Spending dipped on a monthly basis in 11 of the 16 nonresidential subcategories, according to ABC. Meanwhile, public construction spending remains constrained by permitting delays, said Ken Simonson, chief economist at the Associated General Contractors of America in a news release.
“Despite a flurry of project announcements by the federal government, much of the money still has not been awarded in construction contracts, let alone work under way,” said Simonson in the release. “At the same time, major private categories are growing more slowly or shrinking.”
For example, spending on commercial construction, such as retail and warehouse projects, ticked down 1% in October, and remains down about 9.7% over the past 12 months. Spending on manufacturing construction also inched lower by 0.1% in October, according to the data.
But there are signs of optimism for the months ahead, said Basu.
“The effects of these storms on construction spending dynamics should largely dissipate by the end of the year,” said Basu. “Given that a majority of contractors expect their sales to increase over the next six months, according to ABC’s Construction Confidence Index, there’s reason to expect nonresidential construction spending to rebound in the coming months.”