Nonresidential construction sees modest gain in January

Despite a modest upturn in January, spending on private nonresidential construction remained at the second-lowest level in more than three years

Finally, there is some positive news for private nonresidential construction, which reportedly increased for the first time in seven months in January, but unfortunately, the big picture is not so rosy.

According to an analysis of new federal construction spending data by the Associated General Contractors of America, nonresidential construction spending remains below pre-pandemic levels while rising materials prices and proposed labor law changes threaten the sector’s recovery.

“Despite a modest upturn in January, spending on private nonresidential construction remained at the second-lowest level in more than three years and was 10% below the January 2020 spending rate,” said Ken Simonson, the association’s chief economist. “All 11 of the private nonresidential categories in the government report were down, compared to a year earlier.”

Construction spending in January totaled $1.52 trillion at a seasonally adjusted annual rate, an increase of 1.7% from the pace in December and 5.8% higher than in January 2020. Residential construction jumped 2.5% for the month and 21% year-over-year. Meanwhile, combined private and public nonresidential spending climbed 0.9% from December but remained 5.0% below the year-ago level.

Private nonresidential construction spending rose 0.4% from December to January, although declines continued for the three largest components. The largest private nonresidential segment, power construction, fell 10.0% year-over-year and 0.8% from December to January.

Among the other large private nonresidential project types, commercial construction - comprising retail, warehouse and farm structures - slumped 8.3% year-over-year and 1.8% for the month. Office construction decreased 4.4% year-over-year and 0.2% in January. Manufacturing construction tumbled 14.7% from a year earlier despite a 4.9% pickup in January.