Nonresidential spending dip is no cause for alarm
Nonresidential construction spending dipped in February, falling 1.4 percent on a monthly basis according to analysis of U.S. Census Bureau data by Associated Builders and Contractors.
Spending in the nonresidential sector totaled $690.3 billion on a seasonally adjusted, annualized basis in February. While this represents a step back from January's figure of $700.3 billion (revised down from $701.9 billion), it is still 1.5 percent higher than the level of spending registered in December 2015 and 10.1 percent higher than February 2015.
February's weather was particularly harsh in certain parts of the country, including in the economic activity-rich Mid-Atlantic region, and that appears to have had an undue effect on construction spending data. February data are always difficult to interpret, and the latest nonresidential construction spending figures are no different. Seasonal factors have also made state-level data very difficult to interpret.
Beyond meteorological considerations, there are other reasons not to be alarmed by February's decline in nonresidential construction spending. The positive construction employment report indicates continued economic growth. Moreover, much of the decline in volume was attributable to manufacturing, but the ISM manufacturing index recently crossed the threshold 50 level, indicating that domestic manufacturing is now expanding for the first time in seven months.
Eight of the sixteen nonresidential subsectors experienced spending decreases in February, though almost half of the total decline in spending is attributable to the 5.9 percent decline in manufacturing-related spending.
The following 16 nonresidential construction sectors experienced spending increases in February on a monthly basis:
- Spending in the amusement and recreation category climbed 0.4 percent from January and is up 13.7 percent from February 2015.
- Lodging-related spending is up 0.4 percent for the month and is up 30.1 percent on a year-ago basis.
- Water supply-related spending expanded 1.9 percent on a monthly basis and 3.2 percent on a yearly basis.
- Spending in the office category grew 3.8 percent from January and is up 25.3 percent on a year-ago basis.
- Transportation-related spending expanded 0.5 percent month-over-month and 5.8 percent year-over-year.
- Health care-related spending expanded 2 percent from January and is up 3.3 percent from February 2015.
- Public safety-related spending is up 1.8 percent for the month, but is down 5.3 percent for the year.
- Commercial-related construction spending inched 0.1 percent higher for the month and grew 11 percent for the year.
Spending in eight of the nonresidential construction subsectors fell in February on a monthly basis:
- Educational-related construction spending fell 2.4 percent from January, but has expanded 8.5 percent on a yearly basis.
- Communication-related spending fell 15 percent month-over-month, but expanded 11.8 percent year-over-year.
- Spending in the highway and street category fell 2 percent from January, but is 24.5 percent higher than one year ago.
- Sewage and waste disposal-related spending fell 2.4 percent for the month, but is up 2.3 percent for the year.
- Conservation and development-related spending is 4.6 percent lower on a monthly basis and 16.8 percent lower on a year-over-year basis.
- Spending in the religious category fell 4 percent for the month and is up just 0.7 percent for the year.
- Manufacturing-related spending fell 5.9 percent on a monthly basis and is up only 0.8 percent on a yearly basis.
- Spending in the power category fell 0.6 percent from January, but is 4.8 percent higher than one year ago.
Anirban Basu is chief economist for Associated Builders and Contractors.