Construction spending on nonresidential projects fell in September, compared to August, but the Associated Builders and Contractors isn't overly concerned about the drop in production.

Nonresidential construction spending fell in September for the first time in eight months, but the overall outlook for the industry is still very much on the upside, the Associated Builders and Contractors said.

Spending on nonresidential projects dropped a scant 0.1 percent from August to September to nearly $693 billion. Public nonresidential spending grew by 0.7 percent month-to-month, while private sector nonresidential spending fell by 0.7 percent.

But the ABC noted that spending has jumped 12.4 percent on a year-to-year basis, the largest increase since April 2008.

"The last several months have generally been associated with sizable increases in nonresidential construction," Anirban Basu, chief economist for the ABC, said. "Today's release, while not particularly upbeat, does not alter the fact that nonresidential construction spending continues to recover and that most contractors are busier than they were a year ago."

Seven of the 16 nonresidential building sectors saw spending hikes in September:
Education went up 2 percent for the month, and also climbed 11.5 percent year-to-year. Religious facilities grew 5.6 percent on a monthly basis, and are also up 0.8 percent compared to September 2014.

Amusement rose 0.2 percent from August, and has expanded 30.6 percent from a year ago. Transportation increased 1.6 percent for the month, and also jumped 10.2 percent year-to-year. Highways and streets inched 0.3 percent higher in September, and is up10 percent on an annual basis. Sewage and waste disposal rose by 1.1 percent from August, and jumped 12.9 percent from a year earlier.

Water supply construction gained 4.3 percent month-to-month, and is also up 5.6 percent annually. "Although there are many potential forces at work that resulted in September's monthly construction spending decline, most are not alarming," Basu said. "With construction materials prices falling, contractors may be able to offer somewhat lower prices for their services, helping to suppress growth in construction value put in place.

"It is also conceivable that some construction work is being slowed by an ongoing lack of available skilled personnel," Basu added. "This factor has certainly helped to slow residential construction, and it seems reasonable to presume that some nonresidential contractors would face similar issues."

Nine nonresidential subsectors fell on a monthly basis:
Lodging dropped 0.7 percent September, but is up 32.8 percent compared to the same month in 2014. Offices dipped 0.4 percent from August, but have risen 19.3 percent from the same time last year. Commercial construction shed 1.1 percent on a monthly basis, and is down 2 percent from a year ago. Health care spending inched 0.1 percent lower in September, but is up 9 percent year-to-year. Public safety dropped 3 percent month-to-month, and has also dropped 4.8 percent from a year ago. Communications declined 2.7 percent from August, but is up 10.2 percent from September 2014. Power fell 1.7 percent on a monthly basis, but has grown 1.9 percent year-to-year.

Conservation and development lost 6 percent in September, but is 1.6 percent higher from a year ago. Manufacturing shed 0.4 percent for the month, but has jumped 41.3 percent compared to September 2014. "For now, the outlook appears positive," said Basu. "Although the domestic economy only expanded by 1.5 percent during the third quarter, the weakness was largely the result of an adjustment to inventories and the impact of a weaker global economy. Domestic final demand continues to expand at a reasonable clip."

Source: Associated Builders and Contractors
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