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Nonresidential Building Construction Spending Fell for the Second Month in a Row in February

0 2810 Market Intelligence

Nonresidential building construction spending dropped 1.4% at a seasonally adjusted (SA) rate in February after falling 1.3% in January. However, on a year-over-year not seasonally adjusted (NSA) basis, spending was up 8.3% and year-to-date it increased 8.9% compared to the same period in 2011.

Nonresidential building construction spending dropped 1.4% at a seasonally adjusted (SA) rate in February after falling 1.3% in January. However, on a year-over-year not seasonally adjusted (NSA) basis, spending was up 8.3% and year-to-date it increased 8.9% compared to the same period in 2011.

“For lease” private projects spending fell 2.5% (SA) in February, its third consecutive monthly decline. Nonetheless, year-to-date for lease spending increased 2.6% compared to the same period a year ago. Two of the three components of for lease construction projects — lodging and office — were down for the third month in a row. The third, retail, was unchanged in December and decreased in January and February (-2.0% and -2.6%, respectively). Year-to-date, office and retail construction spending were up — 1.3% and 6.4%, respectively. Hotel construction was down 8.4% over the same period.

Construction spending for institutional projects sank 1.7% after rising 0.7% in January. On a year-to-date basis, spending was up 5.9% compared to the same period a year earlier. Only two relatively minor categories, religious and public safety construction spending, representing a little over 9% of institutional spending, increased in February, 2.7% and 0.9%, respectively. However, year-to-date, all institutional categories except religious construction spending were up compared to the same period a year ago.

Manufacturing construction spending was one bright spot in the nonresidential construction category, increasing 2.2% following January’s 7.2% plunge. The general resurgence in manufacturing construction spending, which rose in eleven of the previous thirteen months, was evident in its year-to-date increase of 40.6%.

The Forecast
The threat of even higher oil prices for a sustained period, which at the moment appears to be lessening, and developments in Europe (for now, read Spain) are the chief risks to the forecast. Nonetheless, the expectation is for spending totals to strengthen throughout 2012 and 2013 as the economy grows, companies expand in response to growing demand, and some producers move production from overseas back to the United States. Low long-term interest rates continue to be a positive for investment in plant and equipment. Increasing domestic demand and greater exports to Asia and South America are expected to more than offset the likely slowdown in exports to Europe.

The forecast is for nonresidential construction spending to increase 3.9% in 2012, down from last month’s forecast of 5.8%, and to strengthen in 2013, advancing 8.1%. The reduction in the 2012 forecast is largely due to the unexpectedly poor February performance in many of the nonresidential categories. Expected spending growth was reduced for lodging, office, retail, and education construction in 2012, as well as some minor tamping down on growth rates for some of the other categories.

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

  Monthly Figures*
(latest actual values)
3-Month
Moving Average
Actual Forecast
  Dec-11 Jan-12 Feb-12 Dec-11 Jan-12 Feb-12 2008 2009 2010 2011 2012 2013
Lodging 8.512 7.932 7.682 8.589 8.417 8.042 35.806 25.499 11.329 8.538 8.054 8.753
  Month-over-Month % Change -3.4% -6.8% -3.2% -0.6% -2.0% -4.5%            
  Year-over-year % Change (NSA) -14.5% -7.4% -9.5%       24.7% -28.8% -55.6% -24.6% -5.7% 8.7%
Office 34.603 34.392 33.660 34.760 34.786 34.218 68.563 51.908 37.573 34.478 34.907 38.106
  -2.1% -0.6% -2.1% -0.3% 0.1% -1.6%            
  -2.0% 0.8% 1.9%       5.1% -24.3% -27.6% -8.2% 1.2% 9.2%
Commercial (mainly retail) 44.325 43.427 42.298 44.048 44.021 43.350 86.212 54.069 40.522 43.590 43.831 47.334
  0.0% -2.0% -2.6% -0.5% -0.1% -1.5%            
  14.6% 8.1% 4.8%       -3.9% -37.3% -25.1% 7.6% 0.6% 8.0%
Health Care 41.191 41.154 40.910 40.061 40.907 41.085 46.902 44.845 39.879 39.966 42.253 46.053
  2.0% -0.1% -0.6% 0.1% 2.1% 0.4%            
  2.3% 9.8% 7.8%       7.2% -4.4% -11.1% 0.2% 5.7% 9.0%
Education 85.456 86.254 84.194 85.914 85.965 85.301 104.890 103.202 88.227 84.678 85.685 90.355
  -0.8% 0.9% -2.4% -0.6% 0.1% -0.8%            
  2.8% 5.8% 4.6%       8.4% -1.6% -14.5% -4.0% 1.2% 5.5%
Religious 3.903 3.812 3.916 3.907 3.830 3.877 7.225 6.192 5.208 4.135 3.949 4.234
  3.4% -2.3% 2.7% -2.0% -2.0% 1.2%            
  -20.5% -20.3% -9.2%       -4.2% -14.3% -15.9% -20.6% -4.5% 7.2%
Public Safety 10.689 10.766 10.868 10.270 10.637 10.774 13.083 13.787 11.118 9.993 10.787 10.973
  2.2% 0.7% 0.9% 2.9% 3.6% 1.3%            
  10.9% 12.1% 13.5%       28.3% 5.4% -19.4% -10.1% 7.9% 1.7%
Amusement/Recreation 15.723 16.121 15.499 15.816 15.906 15.781 21.829 19.404 16.959 15.543 15.841 16.794
    2.5% -3.9% -0.9% 0.6% -0.8%            
  -3.0% 5.7% 1.4%       2.9% -11.1% -12.6% -8.3% 1.9% 6.0%
Manufacturing 45.372 42.114 43.037 42.474 42.892 43.508 53.234 56.836 38.106 37.191 43.684 49.669
  10.2% -7.2% 2.2% 3.9% 1.0% 1.4%            
  45.5% 41.2% 39.9%       31.0% 6.8% -33.0% -2.4% 17.5% 13.7%
Total** 289.774 285.972 282.064 285.838 287.361 285.937 437.744 375.742 288.921 278.112 288.991 312.271
  1.2% -1.3% -1.4% 0.3% 0.5% -0.5%            
  8.0% 9.4% 8.3%       8.4% -14.2% -23.1% -3.7% 3.9% 8.1%

* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
** 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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