Construction Forecasts

News & Analysis

Heavy Engineering (Non-Building) Construction Spending Down for the Third Month in a Row

05/22/2012 by Bernard M. Markstein, RCD US Chief Economist

Heavy engineering (non-building) construction spending slid a modest 0.3% on a seasonally adjusted (SA) basis in March, the third consecutive monthly decline, after falling 1.4% in February. On a year-to-date not seasonally adjusted (NSA) basis, heavy engineering spending increased 4.8% from the same period in 2011. Half of the major heavy engineering spending categories were up for the month — transportation (+2.0%), communication (+1.1%), and conservation and development (3.8%). However, on a year-to-date basis all of the categories except power construction spending were down compared to a year ago. Year-to-date power construction spending was up a robust 19.5% from a year ago. It was also the only major category to increase in 2011, up 14.4%.

Reduction in government funding for infrastructure projects continues to be the biggest threat to heavy engineering construction spending. Growth in the national economy will lead to spending by private industry on heavy engineering construction projects, offsetting (just barely) the cuts in government spending. Congress continues to struggle with transportation funding. At the end of March a 90-day extension of transportation funding was passed, the ninth temporary extension since the last long-term funding authorization expired in September 2009. It now appears unlikely that any long-term funding will be forthcoming before the November elections, meaning another temporary extension at the end of June when the current extension ends.

Taking all these factors into consideration, the forecast is for heavy engineering projects construction spending to increase 2.0% in 2012 and 2.4% in 2013. The 2012 forecast is down from last month’s 4.4% increase largely due to significant downward revision in the January and February data by the Census Bureau, revised down $5.4 billion and $3.8 billion, respectively.

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

  Monthly Figures*
(latest actual values)
3-Month
Moving Average
Actual Forecast
  Jan-12 Feb-12 Mar-12 Jan-12 Feb-12 Mar-12 2008 2009 2010 2011 2012 2013
Transportation 35.341 34.621 35.328 34.872 34.948 35.097 35.471 36.701 38.232 35.543 35.504 37.553
  Month-over-Month
  % Change
1.3% -2.0% 2.0% 0.8% 0.2% 0.4%            
  Year-over-year
  % Change (NSA)
-4.4% -4.0% -5.5%       11.3% 3.5% 4.2% -7.0% -0.1% 5.8%
Communication 17.597 17.331 17.520 17.493 17.644 17.483 26.487 19.753 18.261 17.817 17.873 19.769
  -2.3% -1.5% 1.1% 0.2% 0.9% -0.9%            
  4.3% -0.3% -6.0%       -4.0% -25.4% -7.6% -2.4% 0.3% 10.6%
Power 98.674 96.054 95.931 99.876 98.963 96.886 81.075 88.861 78.540 89.884 97.579 97.162
  -3.4% -2.7% -0.1% 1.3% -0.9% -2.1%            
  22.6% 19.5% 16.6%       22.7% 9.6% -11.6% 14.4% 8.6% -0.4%
Highway 77.184 77.651 77.157 80.804 79.088 77.331 81.361 82.166 82.657 78.771 77.021 78.507
  -6.4% 0.6% -0.6% -1.8% -2.1% -2.2%            
  -1.7% 1.0% -3.0%       6.1% 1.0% 0.6% -4.7% -2.2% 1.9%
Water and Sewer 38.525 37.999 36.732 37.988 38.131 37.752 42.448 40.301 41.368 37.240 37.499 38.871
  1.7% -1.4% -3.3% 1.5% 0.4% -1.0%            
  -1.3% 1.1% -3.3%       4.4% -5.1% 2.6% -10.0% 0.7% 3.7%
Conservation & Development 5.956 5.874 6.096 6.079 5.933 5.975 5.234 5.750 6.937 6.929 5.978 6.052
  -0.2% -1.4% 3.8% -4.0% -2.4% 0.7%            
  -18.0% -22.2% -18.7%       -0.5% 9.9% 20.6% -0.1% -13.7% 1.2%
Total** 273.277 269.530 268.764 277.112 274.708 270.524 272.076 273.532 265.995 266.184 271.455 277.912
  -2.9% -1.4% -0.3% 0.1% -0.9% -1.5%            
  6.4% 5.9% 2.4%       9.7% 0.5% -2.8% 0.1% 2.0% 2.4%

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


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