Nonresidential construction spending increased 0.9% from October 2022 to November 2022 and is up 11.8% compared with November 2021, according to www.abc.org.
For public construction, spending decreased 0.1% for the month and is up 10.6% year-to-date. Private nonresidential spending rose 1.7% from October 2022 to November 2022 and is up 12.6% year-to-date. Spending was up for the month in nine of the 16 nonresidential subcategories.
“The average nonresidential contractor starts 2023 with considerable backlog,” said ABC Chief Economist Anirban Basu. “Not coincidentally, contractors also have significant confidence regarding current year prospects, according to ABC’s Construction Confidence Index, which indicates expectations for growth in sales and employment with margins remaining stable.”
Basu says although that confidence likely is warranted, there are factors to consider.
“First, growth in nonresidential construction spending in November was not especially broad,” Basu said. “Much of the growth came from the manufacturing category, which is partially attributable to construction related to large-scale chip manufacturing facilities. The balance of growth came mostly from conservation and development, which includes flood control expenditures. Were it not for those two categories, nonresidential construction spending would have been roughly flat in November.
“Second, backlog could dry up,” Basu continued. “Anecdotal evidence suggests that banks are more cautious in their lending to the commercial real estate and multifamily segments. Fears of recession this year remain pervasive in an environment characterized by high and rising interest rates. 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.”
