National nonresidential construction spending increased 0.9% on a monthly basis in January 2021 but is down 5% since January 2020, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $799.1 billion for the month.
Spending was up on a monthly basis in nine of the 16 nonresidential subcategories. Private nonresidential spending increased 0.4% in January, while public nonresidential construction spending increased 1.6%. Only four nonresidential construction categories have experienced growth in spending on a year-over-year basis, all of which are primarily publicly financed segments.
“It is remarkable that overall nonresidential construction spending has stabilized recently despite the lingering impacts of the COVID-19 pandemic,” said ABC Chief Economist Anirban Basu. “January 2021’s construction spending data line up with the Construction Backlog Indicator produced by ABC, which indicates that backlog is stabilizing and that many nonresidential contractors expect both sales and staffing levels to expand over the next six months.
“There are some key caveats, however,” said Basu. “Private nonresidential construction remains soft in the context of compromised commercial real estate fundamentals. Construction spending in the lodging segment is down nearly 23% over the past year, and office construction spending is down both on both a monthly and yearly basis. The trajectory of remote work, business travel and brick-and-mortar retail is still uncertain, so construction spending in a large number of private categories is poised to remain soft for the foreseeable future.
“There is at least one additional consideration that serves as a bit of a damper in what was an otherwise decent construction spending report for January,” said Basu. “The rise in construction spending in January could largely reflect rising materials prices and efforts by contractors to pass at least some of those increases to purchasers of construction services. It comes as little surprise that many of the contractors who expect rising sales and staffing levels during the first half of 2021 also anticipate shrinking margins.”