"Nonresidential construction spending is down nearly 3% from its peak in April 2019 due to declines in private construction,” says ABC Chief Economist Anirban Basu. "Construction spending in the commercial category, which encompasses retail space among other segments, is down nearly 12% on a year-over-year basis. Spending related to lodging, including new hotel construction, was down 0.7% for the month and is up less than 4% year over year. Spending in the power segment also decreased in August and is down 3.5% compared to the same time last year.

“All of this is consistent with a slowing economy, especially as measures such as industrial production and capacity utilization remain stagnant,” says Basu. “While this could be attributed to trade wars and a slowing global economy, construction dynamics are rarely so simple. Another likely explanation is that America’s growing shortage of skilled construction workers has driven up the cost of delivering construction services, even in the context of flat materials prices, resulting in more project owners delaying projects.

“On the other hand, public construction spending continues to rise,” says Basu. “Construction spending on public safety is up 13.5% on a year-over-year basis and spending in the sewage/waste disposal category is up nearly 19%. State and local governments continue to benefit from an economy that has pushed property tax, sales tax and income tax collections higher. Low borrowing costs also serve as an inducement to leverage revenues with debt, resulting in more infrastructure spending. Given the recent path of interest rates, this dynamic should continue into 2020.”

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