The U.S. Census Bureau announced that construction spending during September 2020 was estimated at a seasonally adjusted annual rate of $1,414.0 billion, 0.3% (±1.0%) above the revised August estimate of $1,410.4 billion. The September figure is 1.5% (±1.3%) above the September 2019 estimate of $1,393.3 billion.
During the first nine months of this year, construction spending amounted to $1,058.5 billion, 4.1% (±1.0%) above the $1,016.7 billion for the same period in 2019.
In September, the estimated seasonally adjusted annual rate of public construction spending was $339.1 billion, 1.7% (±1.5%) below the revised August estimate of $344.8 billion. Highway construction was at a seasonally adjusted annual rate of $89.3 billion, 5.4% (±4.1%) below the revised August estimate of $94.5 billion. Educational construction was at a seasonally adjusted annual rate of $85.3 billion, 2.0% (±1.8%) above the revised August estimate of $83.7 billion.
Spending on private construction was at a seasonally adjusted annual rate of $1,074.9 billion, 0.9% (±0.7%) above the revised August estimate of $1,065.6 billion.
- Residential construction was at a seasonally adjusted annual rate of $610.9 billion in September, 2.8% (±1.3%) above the revised August estimate of $594.3 billion.
- Nonresidential construction was at a seasonally adjusted annual rate of $464.1 billion in September, 1.5% (±0.7%) below the revised August estimate of $471.3 billion.
“The September spending report shows the gulf between housing and nonresidential markets is growing steadily wider,” said Ken Simonson, Associated General Contractors of America (AGC) chief economist. “In our October survey, 75% of respondents reported a postponed or cancelled project, up from 60% in August and 32% in June.”
“The pandemic is suppressing demand for new office buildings, hotels and shopping centers even while it inspires many people to build bigger homes,” said Stephen E. Sandherr, AGC’s chief executive officer. “Without new federal investments in infrastructure and other needed relief measures, commercial firms will have a hard time retaining staff or investing in new equipment and supplies.”
“The pace is of decline in nonresidential construction spending is accelerating,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “This is precisely what had been predicted. Coming into the crisis, the economy was rolling, helping to lift construction backlog amid elevated developer confidence, according to ABC’s Construction Backlog Indicator and Construction Confidence Index. The crisis shattered that equilibrium, producing distressed commercial real estate fundamentals, diminished confidence, postponed and cancelled projects, the embrace of remote work, tighter credit conditions and damaged state and local government finances.
“Though the initial phase of economic recovery has been brisk, economic outcomes are likely to deteriorate markedly during the months ahead absent further stimulus,” said Basu. “That would further delay nonresidential construction’s eventual recovery.
Nonresidential construction spending is down 4.4% from the same time last year, with lodging-related spending down more than 15% and office-related spending down nearly 7%. These are among the segments hardest hit by social distancing directives, and another round of shutdowns would further exacerbate declines in these and other segments.
“The hope is that policymakers in Washington, D.C., will soon see fit to deliver on a long-awaited infrastructure financing and spending program,” said Basu. “Not only would that accelerate the broader economy’s economic recovery, a well-executed infrastructure package would make American workers more productive, unleash new private development opportunities and allow America to better compete in the global marketplace. The longer America has to wait for such a package, however, the more vulnerable its citizens will be to further economic dislocations.”