Report: New pace to nonresidential construction as economy cools

Basu

Construction spending slowed in the second quarter of 2019 according to Marcum LLP, a public accounting and advisory services firm.

Marcum’s Commercial Construction Index, produced by the firm’s National Construction Services group, shows that construction spending slowed as the economy signaled confusion and indecisiveness.

Eleven of Marcum’s 16 nonresidential construction sectors expanded year-over-year, including lodging, office, health care, public safety, amusement and recreation, transportation, highway and street, sewage and waste disposal, water supply, conservation and development, and manufacturing.

Sewage and waste disposal (18.7 percent) and manufacturing (9.9 percent) were the only sectors to register double-digit gains for the 12-month period.

Of the five sectors that contracted for the year, commercial construction registered the biggest decline (10.7 percent), followed by educational, religious, communication and power.

“Nonresidential construction outlays have failed to expand over the past year in real terms despite a surge in spending by state and local governments on a number of infrastructure categories,” says Anirban Basu, Marcum’s chief construction economist.

Basu points to the pending insolvency of the nation’s Highway Trust Fund in 2021 as a key factor.

“If history is any indication, the looming insolvency of the trust fund will induce a growing number of state and local transportation directors to delay needed infrastructure upgrades, removing one of nonresidential construction’s high-growth segments in the process.”