Nonresidential Construction Spending Plummets in June, Driven by Public Sector

September 2017

Nonresidential construction spending fell by 2 percent on a monthly basis in June 2017, totaling $697 billion on a seasonally adjusted, annualized basis according to an analysis of U.S. Census Bureau data released Aug. 1 by Associated Builders and Contractors. June represents the first month during which spending has dipped below the $700 billion per year threshold since January 2016.
June’s weak construction spending report can be largely attributed to the public sector. Public nonresidential construction spending fell 5.4 percent for the month and 9.5 percent for the year, and all 12 public subsectors decreased for the month. Private nonresidential spending remained largely unchanged, increasing by 0.1 percent for the month and 1.1 percent for the year. April and May nonresidential spending figures were revised downward by 1.1 percent 0.4 percent, respectively.
“Coming into the year, there were high hopes for infrastructure spending in America,” said ABC Chief Economist Anirban Basu. “… Instead, public construction spending is on the decline in America. Categories including public safety and flood control have experienced dwindling support for investment, translating into a nine percent decline in public construction spending over the past 12 months.
“On the other hand, several private segments continue to manifest strength in terms of demand for construction services,” said Basu. “At the head of the class are office construction, driven by a combination of job growth among certain office-space-using categories as well as lofty valuations, and communications, which is being driven largely by enormous demand for data center capacity.”