Second Quarter Construction Economics: Residential Sector Recovers Faster than Nonresidential Sector
By Anirban Basu, Chief Construction Economist, Marcum LLP
Issue 36 – Second Quarter 2021
The Marcum Commercial Construction Index for the second quarter of 2021 reports that the construction industry has lagged the broader rate of economic recovery. Nonresidential construction spending is 6.6 percent lower in June 2021 than it was in June 2020, and the industry continues to be plagued by worker shortages.
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Demand for housing continues to boom. Despite elevated inflation, interest rates remain historically low. Theoretically, interest rates shouldn’t be low when inflation is elevated, but free market theory tends to go out the proverbial window when policymakers intervene so forcefully.
Nonresidential construction spending declined 6.6 percent from June 2020 to June 2021. Among 16 categories tracked by the Census Bureau, only sewage and waste disposal experienced year-over-year growth (+2.2 percent).
As the pandemic took hold in early 2020, economic uncertainty as measured by the U.S. Economic Policy Uncertainty Index surged to its highest level in the 36-year history of the data series. Uncertainty has abated since that peak and, as of March 2021, the index fell below January 2020 levels and remained relatively low through the end of the second quarter.