Dive Brief:
- Nonresidential spending equaled $930.1 billion on a seasonally adjusted basis in November, up 0.9% from October and 8.5% year over year, according to a report from Associated Builders and Contractors.
- Spending increased on a monthly basis in nine of 16 nonresidential subcategories. Private nonresidential spending increased 1.7%, while public spending dropped by 0.1%
- Most contractors will start 2023 with a sizable backlog, ABC Chief Economist Anirban Basu said in the report, so it’s no coincidence that ABC has also found that builders have high expectations for growth in sales and employment.
Dive Insight:
Basu said that builders’ confidence is warranted, but that expectations should be tempered.
“There are countervailing considerations,” he wrote. “First, growth in nonresidential construction spending in November was not especially broad.”
Much of the spending growth came from manufacturing, up 6.4% from October and 42.9% year over year. That’s attributable, at least in part, to large chip manufacturing facilities projects. Conservation and development also saw a big jump, up 14.6% from October and 36.7% from a year ago.
“Were it not for those two categories, nonresidential construction spending would have been roughly flat in November,” Basu said.
At the same time, long-held fears of a recession continue.
“Backlog could dry up,” said Basu. “Anecdotal evidence suggests that banks are more cautious in their lending to the commercial real estate and multifamily segments. … It will be interesting to see how well backlog will hold up as contractors continue to build and the economy heads toward what is likely to be a Federal Reserve-induced recession.”
