Weak March US Construction Spending Rebound Masks Nonresidential Construction’s Struggles
Spending on residential construction continues to carry buckets of private and public nonresidential red ink, while the industry yearns for stimulus spending and infrastructure plans to revive commercial construction
May 3, 2021
data: US Department of Commerce; graph: ForConstructionPros.com
The value of U.S. construction put in place in March eked out 0.2% growth after falling 0.6% in February. Commerce Department estimates measured weaker than expected performance, as economists polled by Reuters had forecast construction spending surging 1.9%.
Construction spending, which accounts for about 4% of gross domestic product, in the first quarter of the year was 4.5% greater than in 2020.
Nonresidential Investment Declines 4.8% in Q1, Dragging Down U.S. Economic Expansion
“The U.S. economy expanded rapidly during the first quarter of 2021, but investment in nonresidential structures actually subtracted from growth,” per ABC Chief Economist Anirban Basu.
May 3rd, 2021
Associated Builders and Contractors
The U.S. economy expanded at a 6.4% annualized rate during the first quarter of 2021. However, investment in nonresidential structures declined at a 4.8% rate for the quarter, according to analysis conducted by Associated Builders and Contractors of data released by the Bureau of Economic Analysis.
Many factors were at work in the overall expansion, including sizeable injections of stimulus in recent months and ongoing vaccinations. Personal consumption expenditures, fixed investment and federal, state and local government spending all supported growth.
data: U.S. Census Bureau, table: Sage Policy Group
Improving COVID-19 statistics are generally good for the economy. As the second quarter of 2021 rolled out, ConstructionExecutive.com produced an economic-update webinar in which Anirban Basu, economist with the Sage Policy Group, celebrated the U.S. economy’s demonstration of dramatic recuperative power.
He also warned that the gradual transition to a post-pandemic economy is misaligning supply and demand at multiple levels of construction in a way that will likely push full recovery of large segments of the industry out to 2022.
“For an economy to flourish both the demand and supply sides of the economy must participate. With the federal stimulus coming, demand gets a boost. But supply will be constrained by ongoing lock-down measures not just in America, but in Canada, in South Africa, in Ireland and England, Italy, Spain and Portugal,” says Basu. “So the result in the near term is that the U.S. savings rat
Courtesy of Suez Canal Authority
This story is part of a series of articles looking at the COVID-19 pandemic s effect on the construction industry and how an expected rebound in construction work later this year could be slowed by a variety of forces. Click here for other articles in the series and check back for more throughout the year.
The road to recovery may be longer than you think.
As the second quarter of 2021 kicks off, contractor confidence is high, with plenty of optimism that the coming resurgence of re-started projects will lift construction firms from the abyss of COVID-19 to go even beyond their pre-pandemic heights. Just look at the Associated Builders and Contractors Confidence Index, which is now positive for sales, profit and staffing level expectations for the next six months.
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