As Economy Makes Historic Contraction, Construction Spending Plummets

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Robison Wells
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This week the Department of Commerce reported that the economy shrank at the fastest rate ever recorded between April and June—32.9% in the second quarter of 2020. While construction has resumed and many projects are moving forward at the pace they were pre-pandemic, the overall toll that Covid-19 has had on the construction industry has been severe.

The Associated Builders and Contractors (ABC) analyzed figures released from the U.S. Bureau of Economic Analysis and described the impact that the downturn had on the construction industry.

“Despite construction’s status as an essential industry in most cities and states, the sector did not escape the wrath of COVID-19 during the worst economic quarter on record,” said ABC Chief Economist Anirban Basu in a press release. “ABC’s Construction Confidence Index indicates that a majority of contractors suffered some form of interruption to their activities during the second quarter, whether due to a lack of available inputs as global supply chains buckled, project postponements or cancellations, jobsite workforce issues or state and local government mandates.”

Basu goes on the describe how the construction industry fared better than the retail and hospitality industries—the worst hit—but key construction segments were hit hard, particularly the office, lodging and commercial segments.

The ABC keeps a Construction Backlog Indicator to determine how much work remains in the pipeline, and the indicator appears to be healthy. Still, Basu warns that cancellations are a much more looming concern now than they have been in times past.

“With case counts spiking in parts of the nation, the U.S. economy has yet to begin a rapid economic recovery,” said Basu. “While May and June represented periods of robust economic bounce back in terms of employment, retail sales, building permits and manufacturing activity, recovery will become more erratic over the next several months. That will further delay construction’s eventual rebound, including in segments that are likely to be significant contributors to construction spending growth in the future, such as data centers, fulfillment centers, healthcare and manufacturing.”

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