Construction Forecasts

News & Analysis

Construction Spending Rises 0.2% in June

08/10/2011 by Jim Haughey, RCD Chief Economist

Construction spending increased 0.2% in June but the initial May spending estimate was raised 2.2% by the Census Bureau. There were upward revisions for many project types; the significant revisions were for power generation and residential remodeling, the two least well measured sectors. The 1.9% spring construction spending gain was stronger than the weak 0.8% overall annual rate of economic growth. Growth in the construction market is likely to outpace growth in the overall economy for an extended period. Nonetheless, the construction recovery will be slow in historical perspective with one or more month to month declines possible through early 2012.

A real cutback in public construction, especially buildings financed by municipal governments has been underway since November. This trend will persist through the 2012 fiscal year 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 4.2% 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 10.5%. A 14.4% gain is expected in 2013.

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

  Actual Forecast
  2008 2009 2010 2011 2012 2013
New Residential (% change 238.2 141.4 135.8 129.8 160.3 211.8
is year vs previous year) -34.2% -40.6% -4.0% -4.4% 23.5% 32.1%
Residential Improvements* 120.7 119.3 116.8 119.0 133.2 146.1
  -13.9% -1.1% -2.1% 1.8% 12.0% 9.7%
Non-residential Building 437.4 379.7 290.9 268.1 291.9 330.7
  8.6% -13.2% -23.4% 7.0% 8.9% 13.3%
Non-building 270.9 273.7 269.8 262.5 275.5 296.2
   (heavy engineering) 9.3% 1.0% -1.4% -2.7% 4.9% 7.5%
Total 1067.2 914.2 813.3 779.4 860.8 984.7
  -7.4% -14.3% -11.0% -4.2% 10.5% 14.4%

*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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