The U.S. Census Bureau reported that total construction spending during February 2020 was estimated at a seasonally adjusted annual rate of $1,366.7 billion, 1.3% (±0.8%) below the revised January estimate of $1,384.5 billion.
The February figure is 6.0% (±1.25%) above the February 2019 estimate of $1,289.0 billion. During the first two months of this year, construction spending amounted to $193.5 billion, 8.2% (±1.2%) above the $178.8 billion for the same period in 2019.
In February, the estimated seasonally adjusted annual rate of public construction spending was $340.9 billion, 1.5%(±1.6%) below the revised January estimate of $345.9 billion.
- Highway construction was at a seasonally adjusted annual rate of $102.4 billion, 1.2% (±4.4%) below the revised January estimate of $103.6 billion.
- Educational construction was at a seasonally adjusted annual rate of $79.5 billion, 1.5% (±2.6%) below the revised January estimate of $80.7 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,025.8 billion, 1.2% (±0.7%) below the revised January estimate of $1,038.5 billion. Residential construction was at a seasonally adjusted annual rate of $564.3 billion in February, 0.6% (±1.3%) below the revised January estimate of $567.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $461.5 billion in February, 2.0% (±0.7%) below the revised January estimate of $471.0 billion.
“Spending in February declined 1% from an upwardly revised, exceptionally strong pace in January that was aided by unusually mild winter weather in much of the country,” said Ken Simonson, Associated General Contractors of America chief economist. “Together, the rate in the first two months of 2020 represents a high-water mark immediately before government officials ordered widespread business closures and project owners canceled or halted work on their sites. The survey we conducted March 23 to 26 found that 39% of the more than 1,600 respondents said they had been directed to stop work on one or more projects.”
Simonson added that 45% of respondents reported experiencing project delays or disruptions. Shortages of material, parts and equipment, including vital personal protective equipment for workers such as respirators, were reported by 23% of respondents. Eighteen percent reported shortages of craftworkers, while 16% said projects were delayed by shortages of government workers needed for inspections, permits and other actions. Thirteen percent said delay or disruption had occurred because a potentially infected person had visited a jobsite.
“When projects shut down, jobs are lost not only in construction but also in a host of other industries, ranging from quarries to manufacturers, and truckers to professional services,” the economist noted. “Investing in infrastructure now will bring these jobs back sooner and will buy a lot more construction while fuel and materials costs are low.”
“Data characterizing the economy prior to the coronavirus outbreak continues to trickle in,” said Associated Builders & Contractors (ABC) Chief Economist Anirban Basu. “While nonresidential construction spending declined in February, according to today’s data release, the decline was modest and overall performance was not substantially different from prior months.
“However, with communities in Massachusetts, Pennsylvania, California and elsewhere recently shutting down certain construction projects in an effort to better support social distancing and with economic activity generally grinding toward a halt, the construction spending data will undoubtedly deteriorate further and faster during the months to come,” said Basu. “Unfortunately, that is not where the pain will end. Once the crisis is over, hotel chains will be weaker financially, more storefronts will be empty and fewer employers will be interested in relocating to high-end office space, which will result in diminished demand for nonresidential construction services even after the broader economy comes back to life.
“Typically, nonresidential construction holds up better during the early stages of a downturn as contractors continue to work through their collective backlog, which stood at 8.9 months in January 2020, according to ABC’s Construction Backlog Indicator,” said Basu. “That may still be the case, but, given growing liquidity and solvency problems spreading through the economy, it is quite likely that many construction projects presently on the drawing board will be postponed or canceled. Backlog may disappear quickly as project owners resort to the use of force majeure clauses or other mechanisms to back out of contractual obligations. Time will tell, and eventually the extent to which projects are delayed will be reflected in the construction spending data.”