By Manuel Gutierrez, Consulting Economist to NKBA
According to the Monthly Construction Report released on March 1, 2023 by the U.S. Census Bureau, the residential construction spending annual rate fell by 0.6 percent to $847 billion this January, continuing the eight month decline that started last May. During this period of decline, spending went down by nearly one hundred billion dollars. However, January also saw a rise in homeowners’ spending on remodeling and improvement of their properties.
- The contraction in residential spending was due to the fall in construction of new single family houses. This component fell by 1.7 percent in January to $374 billion. In contrast, the other two components — construction of new multifamily housing units and homeowner remodeling — actually rose, partly offsetting the single family drop.
- Multifamily housing rose, but by only 0.4 percent, the smallest monthly increase in five months. Still, it did bring the value of spending to a $121 billion annual rate — 20 percent higher than it was in January 2022.
- Homeowners’ spending on remodeling and improvement of their properties also rose in January, but by just 0.3 percent to $352 billion. This rate of spending was 7 percent lower than in the middle of last year, when homeowners were spending at a $379 billion annual rate. Despite the slower pace, however, homeowners were spending more than twice as much as pre-pandemic levels.
- Unlike residential construction, nonresidential sector spending increased in January by nearly one percent. Total spending on private non-residential buildings rose 0.9 percent to $595 billion. This is the highest level of spending ever, up 19 percent from a year earlier.
- The construction of manufacturing buildings component accounted for nearly a quarter of total nonresidential spending in January, with a spending rate of $139 billion. Spending in January was 6 percent higher than in the previous month, and a whopping 53 percent higher than in the previous year.
- As for construction of commercial buildings, this component rose by 4.7 percent in January to $121 billion. Commercial construction includes all types of retail establishments, such as shopping malls, restaurants, grocery stores and auto dealerships. Spending on all commercial buildings was up 22 percent from the previous year.
- Closer to our industry, spending on construction of Building Supply Stores rose by 1.5 percent in January to a $1.32 billion annual rate. January’s spending pace was the highest since 2009, but it was still less than half the annual average maintained in the first decade of this century ($2.66 billion).
- Lodging and Office buildings, two nonresidential building types that generate business for many of our members, saw construction spending rise compared to a year ago. Spending on construction of lodging buildings (hotels, for example) was up 41 percent, amounting to $21.6 billion. Despite these gains, lodging buildings construction was still one third below its pre-pandemic levels.
- Office buildings construction was up by a smaller yet robust 14.5 percent in the same period, reaching $83 billion in January. Unlike hotels and motels, construction of office buildings nearly recovered to its pre-pandemic level of $85 billion. However, the uncertainty surrounding businesses’ decision for workers to ‘return to the office’ may limit gains in office construction.
