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August’s continuing boom in home construction offset the continuing decline in other sectors of the building industry, leaving construction spending flat for the month.
“Nearly every nonresidential spending segment has deteriorated from already inadequate 2020 levels during the first two-third of this year,” Ken Simonson, chief economist for the Associated General Contractors of America (AGCA), said in a statement announcing August’s results.
“Meanwhile, soaring materials costs mean that fixed public budgets even buy less infrastructure than before,” he noted.
August saw total construction spending at an annualized rate of about $1.58 trillion, essentially unchanged from July, although the figure is 7 percent above 2020’s for the same period.
Residential construction spent 0.4 percent more in August, year over year, and is up 26 percent for the year through August.
In contrast, nonresidential building’s budget slipped 0.4 percent from July’s and is down 6.7 percent from January through August, compared to the same time in 2020, the AGCA said.
So far this year, roadway construction is off 3.4 percent for the eight-month stretch, building related to public transport 6.5 percent, public water systems 1.8 percent, oil and gas projects 3.6 percent, education 10.6 percent, manufacturing 1.8 percent, office structures 10.1 percent, retail-warehouse-farm building 1.7 percent, and conservation and development down 18 percent.
TREND FORECAST: A sharp commercial real estate decline will occur when interest rates rise. And, as we said in “Urban Malls Next to Fall” (25 Mar 2020) when COVID War was declared, bad mall situations would worsen.
Now, with employees working at home and consumers shopping online, demand for new commercial construction has been permanently reduced. The industry’s focus will shift from building new structures to renovating and remodeling existing ones, especially while high prices for building materials continue.