Non-residential construction continues slump

by Wally Northway

Published: December 2,2009

Tags: construction, recession

Private non-residential spending continues to slump, falling 2.5 percent in October, and is down 20.6 percent from one year ago. Total non-residential construction, which includes both private and public construction, fell 1.5 percent for the month and 10.5 percent on a year-over-year basis to $652.2 billion.

Only four subsectors experienced increased spending in October and only two were up more than one percent. These were conservation and development construction, up 18.2 percent, and religious-related construction, up 2.5 percent. Those subsectors with the largest increases from Oct. 2008 were transportation, up 7.7 percent, public safety construction, up 5 percent, and highway and street construction, up 4.6 percent.

In contrast, subsectors posting the largest decreases for the month include lodging, down 5.8 percent, communication construction, down 5.1 percent and water supply construction, down 5.1 percent. On a year-over-year basis, lodging construction is down 45 percent, commercial construction is down 37.8 percent and office construction is down 27.9 percent. Manufacturing construction is now down 5.9 percent on a year-over-year basis after being a bulwark of stability for many months.

Meanwhile, residential construction spending increased 4.2 percent for the month, but is still down 22.9 percent from October 2008. Total construction spending is unchanged from September and down 14.4 percent year-over-year.

“Over the course of three years, the nation’s construction industry has turned upside down,” said Associated Builders and Contractors chief economist Anirban Basu. “Three years ago, residential construction was entering its worst slump in generations, with housing starts collapsing and many homebuilders failing. Non-residential construction, by contrast, was still in the midst of its growth cycle; one that would last well into 2008.

“Given a still tight credit and weak labor market, building construction is not positioned for recovery in the near term. Certain forms of non-residential construction have held up relatively well, including segments susceptible to public financing and public policy, such as highway/street construction and sewage/waste disposal-related construction. However, it remains to be seen whether those subsectors that were down for the month will continue to slide.”

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