U.S. nonresidential construction spending fell in July

National nonresidential construction spending fell again in July by 1.2%, according to an Associated Builders and Contractors analysis of data published Tuesday by the U.S. Census Bureau. And ABC Chief Economist Anirban Basu says next year is shaping up to be an especially harsh one for contractors.

Spending totaled $809.1 billion for the month of July. Private nonresidential spending declined by 1%, while public nonresidential construction spending was down by 1.3% for the month.

“There are two primary countervailing forces influencing the trajectory of nonresidential construction spending,” Basu said in a statement. “The first is a force for good and involves the reopening of the economy and associated rebound in overall economic activity. Despite the lingering pandemic, third quarter GDP growth is likely to be quite strong. All things being equal, this would tend to strengthen business for contractors.”

Basu said in a statement, however, that the crisis has resulted in tighter project financing conditions and struggles with government financing and commercial vacancy. 

“And while backlog was strong at the start of the year, contractors indicate that it is now declining rapidly, in part due to abundant project cancelations,” Basu said in a statement. “Next year is shaping up to be an especially harsh one for many contractors, especially as some are already indicating that they are nearing the end of their backlog,” said Basu. “The wild card … is Congress. Another stimulus package could go a long way toward improving the trajectory of overall nonresidential construction spending, particularly one with a sizable infrastructure component. The upshot is that declines in nonresidential construction spending are likely even in the context of broader economic recovery.”

Subscribe to Virginia Business.

Get our daily e-newsletter.