Total construction spending decreased 0.8% in May to a seasonally adjusted rate of $1.29 trillion, down from April's revised estimate of $1.3 trillion, the Commerce Department reported on Monday.
Spending sank by 2.3% when compared to May 2018 and, year to date, fell 0.3% from the same January-May period last year. Month over month, May nonresidential spending for both private ($453.3 billion) and public construction ($334.2 billion) fell 0.9%.
This is the largest month-over-month drop in spending since November 2018, according to CNBC.
Private construction spending in both the residential and nonresidential sectors dropped 0.7% to $953.2 billion, the lowest level of investment in more than two years.
This downward trajectory was unexpected, CNBC reported, since industry analysts, like those from Reuters, predicted a 0.1% increase in May spending.
Commercial construction spending
However, according to an analysis of this month's spending data by the Associated Builders and Contractors' chief economist Anirban Basu, spending on nonresidential construction is up 4.4% compared to the same time last year, and investment in public construction projects is up more than 11% year over year. In addition, while spending in May was down slightly from April, in some nonresidential sectors, such as transportation (+4%), communication (+1.3%) and public safety (+1.2%), spending was actually up month over month.
Basu said that there are a variety of factors influencing spending, including rising construction and capital costs and some sentiment that certain segments, like hotels, have perhaps fallen in danger of overbuilding. Public contractors should be able to rest easy, however, as Basu said the strength of most state and local governments' finances should leave more money to spend on infrastructure.
This dip in overall spending comes on the heels of industry reports that contractor confidence has rebounded since the government shutdown — and the uncertainty that came with it — earlier this year. In its second-quarter Commercial Construction Index (CCI), USG Corp. and the U.S. Chamber of Commerce found that the project backlogs survey respondents reported were are at record highs. In addition, the contractors participating in the CCI survey said that confidence in their ability to secure new work during the next year had increased as well.
These reports underscore the volatility of the construction business since the Great Recession — or maybe the variation in how different agencies and groups gauge the economics. Adding perspective, Basu noted that commercial spending is up 102% since 2010.