Nonresidential building construction spending fell 2.5% in October after a 0.5% gain in September Reed Construction Data reported yesterday. Spending fell at a 7.3% annual pace in the last three months. This was sharply lower than the nearly 25% pace over the previous six quarters. October spending was 22% below October 2009.
RCD Chief Economist Jim Haughey says construction spending for “for lease” projects had perked up a few months ago but much of that improvement was revised away and was followed by 5% declines for hotels and office in October and nearly a 2% drop in retail construction spending. This is consistent with the huge decline in September “for lease” project starts. But the September drop in starts was mostly reversed in October so no further huge cuts in “for lease” construction spending are expected in late 2010.
October construction spending declined 1.2% for institutional projects, including 1.5% drops for both education and healthcare. This is an ongoing erosion of spending which will continue into next year. Federal stimulus spending is continuing to ebb and the new Congress is not inclined to appropriate any significant new funds. Most states are still cutting back on facility investments. Even through state tax receipts have been rising on a year over year basis since the beginning of 2010, state budget balances are grim due to the costs imposed by the recession and the expectation that no new federal subsidies for states will be appropriated.
Nonresidential building construction spending is forecast to decline 22.8% this year, rise 0.5% in 2011 and 13.4% in 2012. Through next spring, institutional construction spending will be up only 1%, less than building cost inflation, but “for lease” construction spending will gain 6%. Read More.