Construction Trend Tuesday
Nonresidential momentum confined to two segments
Overall nonresidential construction spending has held up fairly well over the past few years, but that’s only because of a boom in data center and manufacturing (specifically computer chip manufacturing) construction activity.
If we look at nonresidential excluding those two categories (the orange area above), you see that spending is:
only modestly higher than at the start of 2020, rising at about a 2% annualized rate over the past five years, and
lower than in the middle of 2023, falling about 3.2% over that span.
But that first chart is not adjusted for inflation. In inflation-adjusted terms, nonresidential construction activity excluding data centers and manufacturing is down considerably from both the pre-pandemic level and the April 2023 peak.
It probably says a lot about the state of society that so much of what we’re building is meant to support online activity.
It definitely says a lot about the state of nonresidential construction that spending growth is so concentrated in just two segments. Lower interest rates and looser lending standards cannot come soon enough.
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