Construction Forecasts

News & Analysis

Nonresidential Building Construction Down in April

06/19/2012 by Bernard M. Markstein, RCD US Chief Economist

Nonresidential building construction spending fell 0.9% at a seasonally adjusted (SA) rate in April after increasing 0.5% in March. On a year-to-date not seasonally adjusted (NSA) basis, spending increased 10.1% compared to the same period in 2011.

“For lease” private projects spending inched up 0.1% (SA) in April after jumping 2.2% in March. Year-to-date for lease spending increased 9.0% compared to a year ago. April lodging construction spending dropped 5.3% after surging 8.5% in March. The April decline was offset by increases in office and retail construction spending—0.5% and 1.0%, respectively. On a year-to-date basis hotel construction spending rose 8.3%, office construction spending advanced 5.1%, and retail construction spending jumped 12.5%.  

Construction spending for institutional projects slipped 0.4% after falling 0.6% in March. On a year-to-date basis, spending was up 4.6% from a year earlier. Only one of the categories in this group increased in April—health care construction spending (up 2.6%), rebounding strongly after falling 2.0% in March. However, on a year-to-date basis all of these categories were up compared to the same period in 2011, except religious construction spending, which was down 10.7%.

Manufacturing construction spending fell 5.1% in April, only its second decline in the past nine months, after advancing 1.3% in March. Year-to-date spending was up a healthy 38.6% compared to last year.

The Forecast
The chief risks to the construction spending forecast include the continuing problems in Europe (with current focus on Spain and Greece), the expiration of the Bush tax cuts at the end of the year, the need to raise the federal debt ceiling, and the threat (which at the moment appears to be lessening) of significantly higher oil prices for a sustained period. Despite these risks, RCD’s forecast is for spending totals to strengthen throughout 2012 and 2013 as the economy grows, companies expand in response to rising demand, and some producers move production from overseas back to the United States. Low long-term interest rates continue to be a positive for investment in plant and equipment.

The forecast is for nonresidential construction spending to increase 5.4% in 2012 and to improve further in 2013, advancing 7.1%.

U.S. Nonresidential Construction
(billions of U.S. current dollars)

  Monthly Figures*
(latest actual values)
3-Month
Moving Average
Actual Forecast
  Feb-12 Mar-12 Apr-12 Feb-12 Mar-12 Apr -12 2008 2009 2010 2011 2012 2013
For Lease 89.0 90.9 91.0 88.5 89.7 90.3 190.6 131.5 89.4 86.6 92.4 100.3
  Month-over-Month
  % Change
-0.1% 202% 0.1% 0.2% 1.3% 0.7%            
  Year-over-year
  % Change (NSA)
9.2% 9.2% 9.5%       3.8% -31.0% -32.0% -3.2% 6.7% 8.6%
     Lodging 9.1 9.8 9.3 8.7 9.2 9.4 35.8 25.5 11.3 8.5 9.4 10.3
  4.8% 8.5% -5.3% 0.9% 5.0% 2.4%            
  6.8 12.2% 13.3%       24.7% -28.8% -55.6% -24.6% 10.5% 8.9%
     Office 34.3 36.1 36.2 34.6 35.1 35.6 68.6 51.9 37.6 34.5 36.7 40.0
  -1.6 5.1% 0.5% -1.0% 1.4% 1.3%            
  4.2% 5.9% 8.0%       5.1% -24.3% -27.6% -8.2% 6.3% 9.2%
     Commercial
     (mainly retail)
45.6 45.0 45.5 45.2 45.4 45.4 86.2 54.1 40.5 43.6 46.3 50.0
  0.1% -1.2% 1.0% 0.9% 0.5% -0.1%            
  14.1% 11.4% 9.9%       -3.9% -37.3% -25.1% 7.6% 6.2% 8.0%
Institutional 158.0 157.0 156.4 157.5 157.5 157.1 193.9 187.4 161.4 154.3 157.6 165.8
  0.2% -0.6% -.04% 0.3% 0.0% -0.3%            
  8.1% 2.9% 3.6%       8.1% -3.4% -13.9% -4.4% 2.1% 5.2%
     Health Care 42.2 41.4 42.4 41.5 41.5 42.0 46.9 44.8 39.9 40.0 42.4 46.3
  2.8% -2.0% 2.6% 1.5% 0.1% 1.1%            
  11.3% 3.6% 8.2%       7.2% -4.4% -11.1% 0.2% 6.1% 9.2%
     Education 85.2 85.9 85.3 85.5 85.7 85.5 104.9 103.2 88.2 84.7 85.4 88.9
  -0.7% 0.8% -0.7% -0.4% 0.2% -0.2%            
  6.4% 2.6% 1.4%       8.4% -1.6% -14.5% -4.0% 0.9% 4.1%
     Religious 4.1 3.9 3.7 4.0 4.0 3.9 7.2 6.2 5.2 4.1 3.9 4.0
  2.4% -3.5% 4.5% 2.5% 0.2% -1.9%            
  -3.9% -10.3% -10.9%       -4.2% -14.3% -15.9% -20.6% -5.9% 4.0%
     Public Safety 10.9 10.4 9.9 10.7 10.6 10.4 13.1 13.8 11.1 10.0 10.4 10.5
  2.1% -4.8% -4.3% 1.4% -1.0% -2.4%            
  14.1% 5.6% 1.1%       28.3% 5.4% -19.4% -10.1% 3.7% 0.9%
     Amusement/
     Recreation
15.6 15.4 15.0 15.8 15.7 15.3 21.8 19.4 17.0 15.5 15.5 16.1
  -3.5 -1.2% -2.7% -0.6% -0.7% -2.5%            
  2.0% -0.4% 5.9%       2.9% -11.1% -12.6% -8.3% -0.2% 3.8%
Manufacturing 43.5 44.0 41.8 44.1 43.6 43.1 53.2 56.8 38.1 37.2 43.2 47.8
  0.0% 1.3% -5.1% 1.8% -1.0% -1.3%            
  42.5% 38.7% 29.1%       31.0% 6.8% -33.0% -2.4% 16.1% 10.7%
Total** 290.4 291.9 289.2 290.1 290.8 290.5 437.7 375.7 288.9 278.1 293.2 313.9
  0.0% 0.5% -0.9% 0.5% 0.2% -0.1%            
  12.2% 9.0% 8.5%       8.4% -14.2% -23.1% -3.7% 5.4% 7.1%

* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
** Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.


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