The Census Bureau reported that construction spending declined 1.7 percent in March, driven lower by reductions in the nonresidential and public sectors. Total construction spending fell from $871.2 billion at the seasonally adjusted annual rate in February to $856.7 billion in March. The strongest component was the residential sector, up 0.7 percent for the month and 17.8 percent year-over-year. Indeed, the recovering housing market is helping to improve the overall construction numbers, much as it is doing with the larger macroeconomy.
Outside of housing, though, the numbers suggested a lot of weakness. For manufacturers, the level of spending has declined each month so far in 2013, down from $52.2 billion in December to $48.6 billion in March, or 1.1 percent. To be fair, the longer-term trend continues to be positive, as the attached graphic shows, with construction spending in the sector up from a low of $29.5 billion in January 2011.
Looking at other components of private, nonresidential investment, the data are mixed for March, even as they are down 1.5 percent in total. The lower figure stems from declines in spending among educational (down 3.5 percent), commercial (down 3.1 percent), health care (down 3.1 percent), and power (down 2.3 percent) companies. At the same time, there were some pockets of strength in the communications (up 3.7 percent), lodging (up 2.4 percent), religious (up 2.2 percent), and transportation (up 1.1 percent) sectors. The largest year-over-year gains in private, nonresidential construction spending were in the lodging (up 17.8 percent) and office (up 17.4 percent) sectors, with the greatest decline for amusement and recreation businesses (down 13.6 percent).
Meanwhile, public construction spending declined 4.1 percent in March, with government budgets clearly being impacted by sequestration and greater attention to the U.S. fiscal situation. Total public spending in March was $258.3 billion, or 5.4 percent lower than one year before and 20.6 percent below where it was four years ago. Public spending in March was down across-the-board in all categories except for commercial and health care investments. The largest year-over-year declines were in the office (down 29.0 percent), sewage and waste disposal (down 18.0 percent), commercial (down 14.9 percent), and public safety (down 14.7 percent) sectors. At the same time, the greatest annual increases were in the power (up 28.6 percent) and transportation (up 21.6 percent).
Chad Moutray is chief economist, National Association of Manufacturers.
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