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‘Toughest times’ still ahead despite September spike in nonresidential construction

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Private nonresidential construction spending rose 1.3 percent from August to September, according to a recent report from the U.S. Census Bureau.

The manufacturing and religious construction subsectors reported the largest monthly increases in total nonresidential construction, up 5.2 percent and 2 percent, respectively.

“The resilience of nonresidential construction spending in the face of ongoing economic decline and a credit crunch is simply remarkable,” said Anirban Basu, chief economist with Associated Builders and Contractors (ABC), in a press release.

“Many economists had expected September to bring further decline after nonresidential construction declines in both July and August. But, that did not happen as massive shifts in the global economy continue to spur construction.”

The conservation and development and commercial construction subsectors, on the other hand, posted the biggest losses in total nonresidential construction spending for the month, down 17.3 percent and 2.9 percent, respectively.

“Despite September’s bounceback, the outlook remains far from clear,” Basu said, adding that “there remains downward pressure on deal flow and we continue to predict that the toughest times for the nonresidential construction industry are in front of us.”

In reference to public nonresidential construction spending, which dropped 1.3 percent in September compared with the previous month, Basu said: “Many states are reducing allocations for their respective capital improvement programs, which will further suppress construction starts over the next few years.”

Private nonresidential construction spending hit $415.2 billion in September, and overall nonresidential construction spending totaled $715.6 billion, an 11.4 percent increase from the same time last year.