Third Quarter Construction Update: The Good, the Bad, and the Ugly

Issue 37 – Third Quarter 2021

The Marcum Commercial Construction Index for the third quarter of 2021 reports that the construction industry’s recovery slowed during the summer in the face of labor shortages and rising material prices. Nonresidential construction spending remains 10.7 percent below January 2020 levels but is just 1.3 lower than it was one-year ago.

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The Good
After months of delay, the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), which includes $550 million in new money for roads, bridges, broadband, the electrical grid, and many
other public works elements, has been signed into law by President Biden.

The Bad
As of September 2021, nonresidential construction spending was 10.7 percent below the pre-pandemic peak achieved in January 2020. Spending has trended lower recently. In September, spending totaled $791.2 billion on a seasonally adjusted, annual rate, down 0.6 percent from August 2021 and 0.2 percent above the pandemic low point attained June 2021. Nonresidential spending levels stand at levels unobserved since February 2019.

The Ugly
For months, many economists, including certain Federal Reserve officials, have been indicating that inflation is merely transitory. To a large extent, this statement is likely to turn out to be correct, but elevated prices have already lingered far longer than those economists had anticipated.