Construction Forecasts

News & Analysis

Nonresidential Building Construction Spending Takes a Hit

10/03/2011 by Bernard M. Markstein, RCD US Chief Economist

Nonresidential building construction spending dropped 2.0% in July following two months of strong gains. Despite the fall, nonresidential construction was at its second highest level since November 2010. Expansion in “for lease” private projects continued to rise with its fifth consecutive month of increased expenditures. Meanwhile, spending for institutional projects fell, wiping out the June and May increases and leaving the level of spending the lowest it has been since February of this year.

Concern over the economic outlook is acting as a drag on nonresidential construction spending. Nonetheless, spending totals will strengthen in the fourth quarter of this year and in 2012 and 2013. Commercial developers will slow construction on some projects already started and delay some projects scheduled to start because of dimmer prospects for profit when buildings are completed. Institutional project managers will be forced to slow work or delay starts in 2012 as the flow of construction funds drops in a weaker economy. Offsetting these forces will be lower long-term interest rates due to the Federal Reserve’s Operation Twist for those who can obtain funding.

For 2011, nonresidential spending is projected to decline 6.3%. Some improvement occurs in 2012 with 3.3% growth forecast and accelerating into 2013 with 8.2% growth.

U.S. Nonresidential 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
Lodging (% change is period vs 8.308 8.633 8.293 25.499 11.329 8.543 8.886 9.670
   same period, previous year) -26.5% -22.4% -24.6% -28.8% -55.6% -24.6% 4.0% 8.8%
Office 34.451 34.961 34.578 51.908 37.573 34.757 38.009 41.834
-7.6% -5.8% -3.4% -24.3% -27.6% -7.5% 9.4% 10.1%
Commercial (mainly retail) 43.604 44.065 45.030 54.069 40.522 42.576 44.478 47.389
7.8% 6.5% 15.4% -37.3% -25.1% 5.1% 4.5% 6.5%
Health Care 39.395 40.606 40.581 44.845 39.879 39.650 41.574 45.621
0.6% 4.1% 0.8% -4.4% -11.1% -0.6% 4.9% 9.7%
Education 82.541 83.961 80.997 103.202 88.227 82.111 81.740 86.317
-5.9% -5.6% -11.0% -1.6% -14.5% -6.9% -0.5% 5.6%
Religious 4.131 3.887 3.977 6.192 5.208 4.088 3.896 4.177
-24.8% -27.8% -21.7% -14.3% -15.9% -21.5% -4.7% 7.2%
Public Safety 9.960 10.271 9.859 13.787 11.118 9.983 10.531 11.738
-14.0% -8.8% -8.0% 5.4% -19.4% -10.2% 5.5% 11.5%
Amusement/Recreation 15.896 15.703 15.605 19.404 16.959 15.284 15.583 16.664
-4.2% -6.4% -10.1% -11.1% -12.6% -9.9% 2.0% 6.9%
Manufacturing 33.907 37.259 34.951 56.836 38.106 33.596 34.789 39.004
  -15.1% -4.9% -6.4% 6.8% -33.0% -11.8% 3.6% 12.1%
Total 272.193 279.346 273.871 375.742 288.921 270.588 279.487 302.414
-6.0% -3.7% -5.0% -14.2% -23.1% -6.3% 3.3% 8.2%

*Monthly figures are seasonally adjusted at annual rates (SAAR figures).
Source: Census Bureau, U.S. Department of Commerce.
Forecast: Reed Construction Data.


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