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Heavy Engineering Construction Slips in June

0 3264 RSMeans

Heavy engineering (non-building) construction spending edged down 0.2% on a seasonally adjusted (SA) basis in June after staying essentially flat in May. Year-to-date not seasonally adjusted (NSA) construction spending was 2.5% lower than the same period in 2012.

Heavy engineering (non-building) construction spending edged down 0.2% on a seasonally adjusted (SA) basis in June after staying essentially flat in May. Year-to-date not seasonally adjusted (NSA) construction spending was 2.5% lower than the same period in 2012.

April spending was revised up $3.5 billion, 1.4% of the previously reported number. Most of that revision was due to power construction spending (revised up $2.7 billion). May spending, on the other hand, was revised down by $1.5 billion, 0.6% of the previously reported number. Although power construction spending was revised up $1.9 billion, that was more than offset by downward revisions in transportation, highway, and water and sewer construction spending—each of which was revised down by $1.2 billion.

For June, three categories increased—transportation (+1.9%), communication (+2.5%), and power (+3.6%). On a year-to-date basis, only transportation construction spending was higher than the same period in 2012, up 9.9%.

U.S. Heavy Engineering (Non-Building) Construction
(billions of U.S. current dollars)

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA)
  Apr-13 May-13 Jun-13 Apr-13 May-13 Jun-13 Jan-12 to
Jun-12
Jan-13 to
Jun-13
Transportation 40.9 40.5 41.3 40.1 40.5 40.9 16.9 18.6
  Month-over-Month
  % Change
2.3% -1.1% 1.9% 1.1% 0.9% 1.0%    
  Year-over-year
  % Change (NSA)
16.4% 6.7% 3.1% 14.0% 12.5% 8.3% 3.3% 9.9%
Communication 16.0 15.0 15.4 15.5 15.7 15.5 8.3 7.1
  -0.1% -5.9% 2.5% 2.7% 1.0% -1.2%    
  -3.5% -14.4% -17.1% -11.8% -10.2% -12.0% -1.2% -13.7%
Power 83.5 85.1 88.2 81.3 83.0 85.6 39.5 39.3
  3.7% 1.9% 3.6% 0.5% 2.1% 3.1%    
  2.6% 2.3% 2.2% -2.5% 0.5% 2.4% 21.2% -0.6%
Highway 77.6 77.3 75.1 77.3 77.5 76.7 33.7 31.4
  0.2% -0.4% -2.9% 0.4% 0.2% -1.0%    
  -2.0% -5.9% -13.8% -5.2% -4.4% -8.0% 7.3% -6.9%
Water and Sewer 36.2 36.2 34.3 34.8 35.4 35.6 17.1 16.4
  7.3% 0.1% -5.3% 2.1% 1.5% 0.5%    
  0.7% 2.2% -1.3% -5.5% -2.0% 0.5% -1.4% -4.2%
Conservation & Development 5.9 5.8 5.3 6.0 5.8 5.6 2.9 2.7
  1.7% -0.9% -9.4% 0.2% -2.5% -2.9%    
  -2.3% -8.7% -18.3% -5.0% -8.5% -10.0% -22.4% -7.7%
Total (2) 260.0 259.9 259.4 255.0 257.8 259.8 118.5 115.6
  2.6% 0.0% -0.2% 0.9% 1.1% 0.8%    
  2.5% -1.2% -5.5% -2.0% -0.6% -1.7% 7.8% -2.5%

(1) Monthly figures are seasonally adjusted at annual rates (SAAR figures).
(2) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Calculations: Reed Construction Data

The Forecast
Heavy engineering construction appears to have plateaued of late. Public-private partnerships continue to be an important factor, helping to offset some of the reductions in government funding. A few state and local governments are once again proposing new projects or reviving previously shelved projects. Even as these proposals have included government funding, many rely on some form of private funding. Expect public-private partnerships to play an important role in infrastructure projects over the next several years. At the same time, private companies are finding it profitable to invest in their own heavy construction projects.

The Reed forecast is for heavy engineering construction spending to decline 4.0% this year and to advance 6.7% in 2014.

U.S. Heavy Engineering (Non-Building) Construction
(billions of U.S. current dollars)

  Actual Forecast
  2009 2010 2011 2012 2013 2014
Transportation 36.7 38.3 34.7 38.2 41.0 43.6
   Year-over-year % Change 3.5% 4.5% -9.4% 10.0% 7.3% 6.3%
Communication 19.8 17.7 17.7 17.5 15.6 16.7
-25.4% -10.2% -0.3% -0.9% -10.9% 6.7%
Power 88.9 77.9 75.2 94.1 86.3 95.3
  9.6% -12.3% -3.5% 25.1% -8.3% 10.5%
Highway 82.2 82.5 79.3 80.5 77.1 79.8
1.0% 0.4% -3.9% 1.5% -4.3% 3.6%
Water and Sewer 40.3 41.3 36.9 35.3 35.4 37.3
  -5.1% 2.5% -10.7% -4.3% 0.3% 5.4%
Conservation & Development 5.8 7.2 7.5 6.4 5.7 5.8
9.9% 24.7% 5.1% -15.8% -10.4% 1.5%
Total (1) 273.5 265.0 251.3 272.0 261.1 278.5
0.5% -3.1% -5.2% 8.2% -4.0% 6.7%

(1) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

by Bernie Markstein

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