The slight dip in construction spending is not cause for concern as industry spending soared in preceding years. If you were to poll construction business owners and managers, you would find most are still bullish on the industry despite ongoing inflation and labor shortages. Here’s a quick look at why construction spending dips yet sector-wide optimism still outweighs pessimism.
Construction Spending Dips are not Cause for Concern
Economists throughout the United States and other capitalist countries are eager to highlight the natural peaks and troughs of the economic cycle. Construction spending dips are a natural market occurrence, meaning they should not trigger panic from:
- Other relevant parties
In fact, economists and construction business owners alike readily admit construction spending dips are a normal occurrence that will inevitably give way to an uptick in industry activity, potentially within a couple financial quarters.
Crunching the Construction Industry Numbers
A recent report issued by Associated Builders and Contractors reveals spending on nationwide non-residential construction dropped slightly less than 0.5% in August alone. Non-residential construction spending amounted to just under $789 billion in the month when seasonally adjusted, ultimately dipping about 3 percentage points from the same point in time in 2020.
Furthermore, construction industry spending decreased on a month-to-month basis in slightly more than half of the 16 non-residential groupings. It is particularly interesting to note that spending on private non-residential properties decreased by 1%. Spending on non-residential construction in the public space increased by half a percentage point in the month.
Non-residential construction figures, facts, and emerging trends are important to economists and industry analysts. The following factors play a role in shaping the influx of capital (or lack thereof) into non-residential construction:
- Labor supply (currently a shortage)
- Lack of investor/venture capitalist confidence
- Ongoing liquidity issues
- Spikes in capital costs
Data analysis about non-residential construction is especially important to economists and construction industry analysts as uncertainty plagues the economy’s rebound from the coronavirus pandemic.
The following factors are all legitimate causes for concern:
- Excessive fluctuations in asset prices
- The cost of shipping
- Labor shortages
- The prospect of additional virus-related lockdowns
It is clear that the non-residential space is trending in the wrong direction at the current moment yet market fluctuations will ultimately propel the economic pendulum to swing in the opposite direction in due time. Anticipate the inevitable industry-wide rebound, plan accordingly with the assistance of a construction recruiter and you will reap the benefits.
Work Delays are on the Rise as Construction Spending Dips
The gradual decline in construction spending across recent months is partially the result of rising labor costs. Factor in rampant inflation that is hiking the cost of materials prices and that many more industry leaders are delaying construction commencement until later dates.
Reduced spending on non-residential construction has ultimately slowed growth. The silver lining is that construction spending in February was still up more than 5% on a year-over-year basis. Fast forward a couple of months or financial quarters into the future, and you might find construction spending inches back toward previous levels.
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