Construction Forecasts

News & Analysis

Construction Spending Declines 0.6% in May

07/11/2011 by Jim Haughey, RCD Chief Economist

Construction spending declined 0.6% in May and the first reported 0.4% gain in April was revised to a 0.6% fall. Small May improvements in power, sewer and public safety are unlikely to persist since these markets are in a declining phase. This is consistent with the generally much weaker growth in the overall economy early in the spring. June was a stronger month for the economy so June construction spending should be steady to only slightly lower. Overall, the construction recovery is set to begin but remains on hold due to the recent weakening in the economy.

A real cutback in public construction, especially buildings financed by municipal governments has been underway since November. was This trend will persist through 2011 as state and local governments are forced to balance their budgets with depressed revenues, exhausted reserves and the end of federal stimulus funds on June 30th. The proposed budgets for FY 2011-12 are spending cuts from the current budget year in almost all states.

The Reed Construction Data spending forecast now projects a 5.2% decline in 2011 although spending will be rising steadily by summer. The delayed recovery early in 2011 pushes some work into next year but lowers the 2012 gain to 12.6%

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

  Actual Forecast
  2006 2007 2008 2009 2010 2011 2012
New Residential (% change 476.9 362.3 238.2 141.4 135.8 130.8 170.6
is year vs previous year) -1.7% -24.0% -34.2% -40.6% -4.0% -3.7% 30.4%
Residential Improvements* 145.9 140.2 120.7 119.3 116.8 116.9 133.9
  11.2% -3.9% -13.9% -1.1% -2.1% 0.1% 14.5%
Non-residential Building 339.3 402.8 437.4 379.7 290.9 265.9 293.5
  12.4% 18.7% 8.6% -13.2% -23.4% -8.6% 10.4%
Non-building 207.4 247.8 270.9 270.9 269.8 257.5 270.3
   (heavy engineering) 12.5% 19.5% 9.3% 1.0% -1.4% -4.6% 5.0%
Total 1169.4 1153.0 1067.2 914.2 813.3 771.2 868.3
  6.1% -1.4% -7.4% -14.3% -11.0% -5.2% 12.6%

*Residential Improvements include remodeling, renovation and replacement work.
Source: U.S. Census Bureau, Department of Commerce.
Forecasts and table: Reed Construction Data.


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