National nonresidential construction spending has increased by a modest 0.8% in July, according to an analysis of government spending data from the U.S. Census Bureau by Associated Builders and Contractors (ABC). On a seasonally adjusted annualized basis, nonresidential spending totaled $847.6 billion last month. 

Spending increased on a monthly basis in 13 of the 16 nonresidential subcategories, with declines in sewage and waste disposal, water supply, and health care. Spending on highways and streets and public safety saw the largest jumps over the month, up 4.4% and 2.3%, respectively. Public safety, however, is still down 4.7% over the last year. 

Gains in public nonresidential spending helped keep the nonresidential sector positive in July, even while overall construction spending fell 0.4% last month. 

“The nonresidential sector continues to grapple with rising borrowing costs, elevated materials and labor costs and pervasive economic pessimism,” said ABC Chief Economist Anirban Basu. “Despite a modest increase in July, nonresidential construction spending remains below its pre-pandemic level. There is, however, at least one bright spot for the industry: publicly financed construction. State and local governments are flush with cash, and considerable funding is slated for various forms of infrastructure.”

“For privately financed construction, circumstances could get worse before they get better,” Basu added. “The Federal Reserve recently recommitted to further tightening monetary policy. Market sentiment quickly turned negative. Rather than disappear, supply chain challenges are proliferating in much of the world, including in Europe and China, and the risk of recession is elevated.”

“This is simply not a set of circumstances conducive to rapid nonresidential construction spending growth, and according to the most recent Construction Confidence Index, just 31% of contractors expect their profit margins to grow over the next six months.”