News

Nonresidential Building Construction Hits an Air Pocket in August

0 3876 Market Intelligence

Nonresidential building construction spending slumped 1.2% at a seasonally adjusted (SA) rate in August after a 0.3% decline in July. July’s spending was revised up $1.1 billion or 0.4%, reducing the decline from the originally reported 0.7%. Despite three consecutive monthly decreases, not seasonally adjusted (NSA) year-to-date spending rose 7.3% from the same period last year.

Nonresidential building construction spending slumped 1.2% at a seasonally adjusted (SA) rate in August after a 0.3% decline in July. July’s spending was revised up $1.1 billion or 0.4%, reducing the decline from the originally reported 0.7%. Despite three consecutive monthly decreases, not seasonally adjusted (NSA) year-to-date spending rose 7.3% from the same period last year.

“For lease” private projects spending dropped 1.0% (SA) in August after no change in July. Nonetheless, year-to-date for lease spending was up 8.4% over a year earlier. Lodging construction spending slipped 0.3% in August after strongly advancing 1.6% in July. August office construction spending tumbled 1.2% after rising 0.8% in July. Retail construction spending fell 0.9% in August after declining 1.1% in July. On a year-to-date basis, lodging spending was up a robust 25.6%, office construction spending increased 3.7%, and retail construction spending advanced 8.6% over the same period in 2011.

Construction spending for institutional projects plunged 1.5% in August after inching up 0.1% in July. On a year-to-date basis, spending still was 2.1% higher than a year ago. Only two of the categories in this group increased in August — health care rose a modest 0.4% and public safety, the smallest spending category in the group, soared 3.3%. All of the institutional project categories were up over 2011 on a year-to-date basis except for religious construction spending (-7.9%) and amusement/recreation construction spending (-1.9%).

Manufacturing construction spending continued its downward trend, falling for the third month in a row. For August, it fell 0.6% after plunging 2.0% in July. Further, both the June and July spending numbers were revised down, $1.6 billion (-3.1%) and $1.5 billion (-2.9%). The June revision was sufficient to change a small gain (+0.5%) to a big loss (-2.7%). Despite the negative numbers, year-to-date spending was a healthy 26.5% higher than a year earlier. As troubling as the recent monthly numbers are, one positive sign is a sharp jump in Reed Construction Data manufacturing starts in September. This may be an early indication that manufacturing construction spending is about to pick up.

U.S. Nonresidential Construction
(billions of U.S. current dollars)

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA)
  Jun-12 Jul-12 Aug-12 Jun-12 Jul-12 Aug-12 Jan-11 to
Aug-11
Jan-12 to
Aug-12
For Lease 93.9 93.9 93.0 93.9 94.1 93.6 56.8 61.5
  Month-over-Month
  % Change
-0.7% 0.0% -1.0% 0.2% 0.3% -0.6%    
  Year-over-year
  % Change (NSA)
4.7% 6.2% 2.3%       -5.3% 8.4%
     Lodging 11.4 11.6 11.6 11.1 11.3 11.5 5.8 7.2
  4.1% 1.6% -0.3% 0.8% 1.7% 1.8%    
  24.3% 35.5% 30.3%       -29.3% 25.6%
     Office 35.9 36.2 35.8 35.9 36.1 36.0 22.7 23.6
  -0.5% 0.8% -1.2% 0.1% 0.6% -0.3%    
  0.5% 6.1% 2.5%       -10.4% 3.7%
     Commercial
     (mainly retail)
46.6 46.1 45.6 46.9 46.7 46.1 28.3 30.7
  -2.0% -1.1% -0.9% 0.1% -0.4% -1.4%    
  4.2% 1.2% -2.7%       7.0% 8.6%
Institutional 157.8 157.9 155.6 156.3 157.2 157.1 102.3 104.5
  1.2% 0.1% -1.5% 0.4% 0.6% -0.1%    
  2.1% 2.5% -1.0%       -5.7% 2.1%
     Health Care 41.0 41.3 41.4 41.1 41.2 41.2 26.1 27.0
  -0.7% 0.6% 0.4% 0.7% 0.3% 0.1%    
  0.9% 1.5% 2.2%       1.4% 3.4%
     Education 86.9 87.0 84.5 85.2 86.0 86.2 56.3 57.8
  3.5% 0.1% -2.9% 0.6% 1.0% 0.2%    
  2.6% 3.0% -2.2%       -7.3% 2.6%
     Religious 3.9 3.9 3.9 3.9 3.9 3.9 2.8 2.6
  0.9% 1.0% -0.5% -1.4% -0.2% 0.5%    
  -3.9% -6.2% -13.1%       -19.5% -7.9%
     Public Safety 10.2 10.2 10.5 10.4 10.3 10.3 6.6 6.8
  -4.4% 0.3% 3.3% -1.3% -0.3% -0.4%    
  -4.7% 2.4% -3.9%       -12.9% 3.6%
     Amusement/
     Recreation
15.8 15.6 15.3 15.8 15.8 15.5 10.6 10.4
  -2.3% -1.3% -2.0% -0.1% 0.0% -1.9%    
  -4.8% -2.9% -3.5%       -4.5% -1.9%
Manufacturing 49.2 48.2 47.9 49.5 49.3 48.4 24.8 31.3
  -2.7% -2.0% -0.6% 0.9% -0.3% -1.8%    
  10.9% 14.3% 6.1%       -12.1% 26.5%
Total (2) 300.9 300.0 296.4 299.7 300.6 299.1 183.9 197.4
  -0.1% -0.3% -1.2% 0.4% 0.3% -0.5%    
  3.4% 4.8% 0.6%       -6.5% 7.3%

(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
The chief risks to the forecast for construction spending include the problems in Europe, the approaching fiscal cliff/slope, the federal debt ceiling, and an extended period of significantly higher energy prices. Reed Economics believes that these risks will be avoided and the U.S. economy will continue to grow.

Improved U.S. economic growth, additional hiring and investment by business spurred on by rising demand, and low long-term interest rates are the basis for the forecast. Nonresidential construction spending is projected to rise 5.6% in 2012, 6.3% in 2013, and 10.1% in 2014.

U.S. Nonresidential Construction
(billions of U.S. current dollars)

  Actual Forecast
  2009 2010 2011 2012 2013 2014
For Lease 131.5 88.9 87.1 93.6 100.0 109.9
   Year-over-year % Change -31.0% -32.4% -2.1% 7.4% 6.9% 9.9%
     Lodging 25.5 11.6 8.9 11.2 12.6 13.9
-28.8% -54.4% -23.7% 25.7% 12.9% 10.3%
     Office 51.9 37.9 34.6 36.0 38.9 42.9
  -24.3% -27.1% -8.5% 3.8% 8.3% 10.1%
     Commercial (mainly retail) 54.1 39.5 43.6 46.5 48.5 53.1
-37.3% -27.0% 10.4% 6.6% 4.3% 9.6%
Institutional 187.4 161.1 154.7 157.0 164.1 177.9
  -3.4% -14.0% -4.0% 1.5% 4.6% 8.3%
     Health Care 44.8 39.3 39.7 41.4 45.2 50.0
-4.4% -12.3% 0.9% 4.3% 9.1% 10.7%
     Education 103.2 88.4 84.3 85.4 88.3 95.4
  -1.6% -14.3% -4.6% 1.3% 3.4% 8.0%
     Religious 6.2 5.3 4.2 3.9 4.0 4.3
-14.3% -14.6% -20.1% -6.9% 2.4% 6.9%
     Public Safety 13.8 11.2 10.2 10.5 10.6 11.0
5.4% -19.1% -8.2% 2.6% 1.1% 3.6%
     Amusement/Recreation 19.4 16.9 16.2 15.7 16.0 17.2
-11.1% -12.7% -4.5% -2.8% 1.7% 7.3%
Manufacturing 56.8 40.4 41.4 48.5 53.8 62.5
  6.8% -29.0% 2.6% 17.2% 11.0% 16.2%
Total (1) 375.7 290.4 283.1 299.1 318.0 350.3
-14.2% -22.7% -2.5% 5.6% 6.3% 10.1%

(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

Leave a comment

Or register to be able to comment.