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Nonresidential Building Spending Trends Higher07-15-15 | News

Nonresidential Building Spending Trends Higher

Through the first five months of 2015, the private sector has been on a tear in terms of spending on nonresidential building projects.

Spending on private nonresidential construction projects increased a modest 1.1 percent in May on a monthly basis, but has jumped 8.1 percent over the past year.

The manufacturing sector is a big reason why.

From January through May alone, nonresidential spending has increased 7.1 percent, the Associated Builders and Contractors said in a news release. This is the best five-month growth rate since the same time frame in 2007.

"Although it took several years to get to this point of the recovery, contractors will find themselves steadily becoming busier, with margins gradually expanding," Anirban Basu, chief economist for the ABC, said.

"The principle obstacle to progress will be skilled labor shortages, which eventually will translate into faster inflation, rising interest rates and the move into the final stage of the current economic expansion," Basu added.

Private sector spending on manufacturing-related projects is up a whopping 69.5 percent for the year, the ABC said, citing a Census Bureau construction spending report for May.

On a year-to-year basis, manufacturing easily outdistanced all other sectors. Lodging was the next highest industry at 30.6 percent; this sector is up 3.2 percent month-to-month.

Manufacturing was also one of the leaders in spending on a month-to-month basis, rising 6.2 percent. It was eclipsed only by the conservation industry, which was up 8.6 percent in May; conservation rose 27.3 percent on an annual basis. Nine of the 16 sectors, including manufacturing, lodging and conservation, increased on a monthly basis, most of them with modest gains or losses.

But 13 of the same 16 sectors posted gains on a yearly basis, some of them with hefty, double-digit hikes, including manufacturing, lodging and conservation. The office sector is up 24.6 percent; the communications industry posted a 15.7 percent gain; and the commercial sector rose 11.4 percent.