Construction Spending Inches Forward in September

11/30/2011 by Bernard M. Markstein

Share

Total construction spending edged up 0.2% in September after rising 1.6% in August, the fifth monthly increase in the last six months, according to data from the U.S. Census Bureau. September total construction spending was $787.2 billion at a seasonally-adjusted annual rate. Year-to-date construction spending was down 3.5% compared to the same period a year ago. Nonresidential building slipped slightly from $283.2 billion in August to $282.8 billion, down 0.1%, while heavy engineering (non-building) construction spending was flat at $268.1 billion for both months. Thus it was residential construction spending, which was up 0.7%, that lifted total construction spending to a small monthly gain.

Total public construction spending in September returned to its general downward trajectory, falling 0.6% after an unusual 3.5% increase in August. Meanwhile, private construction spending rose 0.6%. Over the last twelve months, public spending has fallen in every month except two (June and August). The downward trend will persist throughout the rest of this year and into next as state and local governments strive to balance their budgets in the face of depressed revenues, exhausted reserves, and the end of federal stimulus funds. The proposal by the administration now being offered as separate pieces of legislation to invest in infrastructure, if enacted, would offset some of this likely reduction. However, current gridlock in Washington makes the passage of any of the pieces extremely unlikely.

U.S. Total Construction Spending
(billions of U.S. current dollars)

  Current Monthly 3-Month Moving Average Year-to-Date (NSA)
  Jul-11 Aug-11 Sep-11 Jul-11 Aug-11 Sep-11 Jan-10 to
Sep-10
Jan-11 to
Sep-11
New Residential 127.5 129.2 129.4 126.9 127.8 128.7 103.6 95.0
  Month-over-Month % Change 0.6% 1.4% 0.2% 0.1% 0.7% 0.7%    
  Year-over-year % Change (NSA) -8.4% -2.3% -7.8%       -2.5% -8.3%
Residential Improvements* 105.4 105.5 106.9 120.6 112.1 105.9 84.3 85.7
  -16.0% 0.1% 1.3% -3.8% -7.0% -5.5%    
  -6.1% -4.3% -1.6%          
Nonresidential Building 279.7 283.2 282.8 278.7 282.4 281.9 221.3 206.6
  -1.6% 1.3% -0.1% 1.5% 1.3% -0.2%    
  -2.7% -1.1% -2.4%       -24.8% -6.7%
Heavy Engineering (Non-Building) 260.6 268.1 268.1 260.5 263.9 265.6 192.7 192.8
  -0.9% 2.9% 0.0% 0.8% 1.3% 0.6%    
  -1.3% 0.7% -2.1%       -5.2% 0.0%
Total** 773.3 786.0 787.2 786.8 786.3 782.2 602.0 580.1
  -3.3% 1.6% 0.2% 0.2% -0.1% -0.5%    
  -3.8% -1.1% -2.0%       -12.4% -3.5%

Monthly levels are seasonally adjusted at annual rates (SAAR figures).
*Residential Improvements include remodeling, renovation and replacement work.
Number also includes RCD estimate of improvements to public housing.
**Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce.

Reed Construction Data projects a 2.9% decline in total construction spending this year as the national economy continues to struggle through a period of slow growth amid problems in the Euro zone, uncertainty among U.S. businesses, and low levels of confidence among consumers. However, positive economic data continue to accumulate, suggesting that the United States will avoid a recession. Assuming no recession, the RCD forecast is for total construction spending to increase 3.9% in 2012 and 6.8% in 2013. The forecast for 2012 spending growth has been reduced almost 1% (from 4.8%) and the 2013 projection has been shaved from 7.2% largely due to reduced projections for government spending.

Although we remain concerned about possible negative developments in the Euro zone and their impact on the U.S. economy, we have seen enough strength in the U.S. economy to reduce the probability of recession to 25% from our previous 30%. To see the RCD alternative recession forecast go to The Impact of a Recession on the Construction Outlook.

U.S. Total Construction Spending
(billions of U.S. current dollars)

  Actual Forecast
  2008 2009 2010 2011 2012 2013
New Residential 237.0 141.2 136.2 128.6 132.4 142.1
   Year-over-year % Change -34.3% -40.4% -3.5% -5.6% 2.9% 7.3%
Residential Improvements* 120.7 112.7 112.5 112.8 110.3 115.2
-13.5% -6.6% -0.2% 0.3% -2.2% 4.5%
Nonresidential Building 437.7 375.7 288.9 276.0 290.0 314.0
8.4% -14.2% -23.1% -4.5% 5.1% 8.3%
Heavy Engineering (Non-Builidng) 272.1 273.5 266.0 263.3 278.5 294.8
  9.7% 0.5% -2.8% -1.0% 5.8% 5.9%
Total** 1,067.6 903.2 803.6 780.7 811.1 866.1
-7.4% -15.4% -11.0% -2.9% 3.9% 6.8%

*Residential Improvements include remodeling, renovation and replacement work.
Number also includes RCD estimate of improvements to public housing.
**Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

Recent Comments