Construction Forecasts

News & Analysis

The Impact of a Recession on Heavy Engineering (Non-Building) Construction Spending

09/09/2011 by Bernard M. Markstein, RCD US Chief Economist

This section presents the impact of our alternative forecast of a recession on heavy engineering (non-building) construction spending. The recession forecast is not our view of what is most likely to happen but is of high enough probability (30%) to provide this alternative forecast. The table below shows the outlook based on our recession forecast with a comparison of the percentage changes to our baseline (main, most probable) forecast numbers. See The Impact of a Recession on the Construction Outlook for an overview of our recession forecast.

Heavy engineering (non-building) construction does fairly well because for most sectors commitments already made will carry through 2012 and into 2013. Water and sewer construction spending shows the most growth in the recession scenario since these are long-term contracts for which in many cases bond issues have already been issued. Further, federal regulations may require some of this spending. Transportation spending also holds up reasonably well, again due to long-range planning and funding. Spending for communication is most likely to be negatively affected, dropping from 7.2% growth in 2012 and 11.5% growth in 2013 in our baseline forecast to -2.0% and 0.0%, respectively, in our recession forecast.

U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)

  Monthly Figures*
(latest actual values)
Annual Figures
  Actual Forecast
  May-11 Jun-11 Jul-11 2009 2010 2011 2012 2013
Transportation (% change is period 35.621 35.740 35.137 36.701 38.232 36.206 36.311 37.919
versus same period, previous year) -10.6% -9.7% -8.9% 3.5% 4.2% -5.3% 0.3% 4.4%
Baseline Forecast YOY % Change           -8.0% 3.9% 11.2%
Communication 17.701 18.317 18.454 19.753 18.261 18.082 17.727 17.727
0.3% 1.9% -3.6% -25.4% -7.6% -1.0% -2.0% 0.0%
Baseline Forecast YOY % Change           0.8% 7.2% 11.5%
Power 86.258 88.280 87.885 88.861 78.540 85.097 83.057 81.192
17.7% 15.7% 18.9% 9.6% -11.6% 8.3% -2.4% -2.2%
Baseline Forecast YOY % Change           3.3% -2.0% -1.0%
Highway 74.812 74.493 74.892 82.166 82.657 75.722 75.083 76.451
-9.5% -10.7% -5.9% 1.0% 0.6% -8.4% -0.8% 1.8%
Baseline Forecast YOY % Change           -6.9% 7.2% 9.6%
Water and Sewer 36.260 36.930 37.040 40.301 41.368 37.484 37.954 39.995
-13.2% -11.3% -13.1% -5.1% 2.6% -9.4% 1.3% 5.4%
Baseline Forecast YOY % Change           -6.9% 6.9% 12.4%
Conservation & Development 7.353 6.806 6.463 5.750 6.937 7.132 7.162 7.137
6.5% -12.9% -6.8% 9.9% 20.6% 2.8% 0.4% -0.3%
Baseline Forecast YOY % Change           5.2% 4.8% 6.8%
Total 258.005 260.566 259.871 273.532 265.995 259.723 257.294 260.421
-1.7% -2.8% -0.7% 0.5% -2.8% -2.4% -0.9% 1.2%
Baseline Forecast YOY % Change           -3.1% 3.6% 7.0%

* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
The total includes some miscellaneous buildings.
Actuals: U.S. Census Bureau, Department of Commerce (put-in-place investment figures).
Forecasts and table: Reed Research Group.


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