Heavy Engineering Construction Begins to Improve in February

04/26/2013 by Bernard M. Markstein

After plunging 5.3% on a seasonally adjusted (SA) basis in January, heavy engineering (non-building) construction spending advanced 0.9% in February. The January drop should be kept in perspective. November and December’s heavy engineering spending numbers were inflated by the end-of-the-year power construction spending done to take advantage of expiring tax benefits. Thus, while total heavy engineering spending increased 7.7% in November and 0.8% in December, excluding power construction spending, the respective monthly changes were an increase of 0.1% and a decrease of 1.4%. Further, January’s spending drop of 5.3% turns into an ex-power-spending increase of 0.7%. Year-to-date not seasonally adjusted (NSA) total (including power) heavy engineering construction spending was up 2.1% from the same period in 2012.

Only one of the categories in the group was down for the month: communication (-9.1%). At the same time, highway construction spending, a much larger category jumped 3.5% in February after increasing 1.7% in January. Note that highway spending is exempt from sequestration. Construction spending for two categories was down on a year-to-date NSA basis: communication (-4.8%) and water and sewer (-8.5%).

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

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA)
  Dec-12 Jan-13 Feb-13 Dec-12 Jan-13 Feb-13 Jan-12 to
Feb-12
Jan-13 to
Feb-13
Transportation 38.9 38.9 39.1 39.9 39.0 39.0 4.7 5.3
  Month-over-Month
  % Change
-0.8% -0.2% 0.6% -0.1% -2.2% -0.1%    
  Year-over-year
  % Change (NSA)
7.8% 11.4% 13.8% 15.9% 11.8% 10.8% -3.8% 12.6%
Communication 17.0 17.2 15.6 16.9 17.1 16.6 2.4 2.3
  -0.9% 1.0% -9.1% -1.7% 1.1% -3.0%    
  -8.0% 2.9% -12.0% -0.5% -1.0% -6.2% 2.8% -4.8%
Power 116.4 99.9 100.9 106.4 109.3 105.7 14.8 15.3
  4.2% -14.2% 1.0% 8.8% 2.7% -3.3%    
  48.9% 0.5% 6.5% 35.9% 31.5% 18.9% 51.5% 3.4%
Highway 77.6 78.9 81.6 77.8 78.3 79.4 7.5 7.7
  -0.9% 1.7% 3.5% -0.3% 0.6% 1.4%    
  -6.4% 4.2% 1.0% -4.5% -4.2% -1.1% -0.6% 2.5%
Water and Sewer 34.7 34.4 34.4 35.1 35.0 34.5 5.3 4.9
  -3.3% -0.9% 0.1% -0.4% -0.2% -1.4%    
  -6.0% -8.9% -8.1% -5.0% -5.5% -7.6% 0.2% -8.5%
Conservation & Development 6.0 6.1 6.2 6.1 6.0 6.1 0.9 0.9
  -2.1% 2.1% 1.3% -3.1% -1.2% 0.4%    
  -9.4% 3.9% -0.4% -10.2% -5.3% -2.5% -22.8% 1.7%
Total (2) 290.5 275.2 277.8 282.2 284.7 281.2 35.6 36.4
  0.8% -5.3% 0.9% 2.8% 0.9% -1.2%    
  15.7% 1.6% 2.6% 11.5% 11.1% 7.1% 14.8% 2.1%

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

The availability of public funds for new heavy engineering construction projects will be limited for the next few years. Public-private partnerships are being used by many states and localities for new projects to address these funding limitations. Meanwhile, the private sector will find it profitable to invest in numerous heavy construction projects such as power and communication. The Reed forecast for heavy engineering construction spending is for an increase of 6.0% this year and for an increase of 6.9% in 2014.

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

  Actual Forecast
  2009 2010 2011 2012 2013 2014
Transportation 36.7 38.3 34.9 37.3 40.5 44.2
   Year-over-year % Change 3.5% 4.5% -9.1% 7.1% 8.4% 9.2%
Communication 19.8 17.7 17.5 17.1 17.0 18.2
-25.4% -10.2% -1.1% -2.5% -0.5% 6.9%
Power 88.9 77.9 74.0 98.0 110.2 119.7
  9.6% -12.3% -5.1% 32.5% 12.4% 8.6%
Highway 82.2 82.5 78.9 79.4 81.4 85.2
1.0% 0.4% -4.4% 0.7% 2.5% 4.7%
Water and Sewer 40.3 41.3 36.8 35.4 34.6 36.1
  -5.1% 2.5% -11.0% -3.9% -2.1% 4.3%
Conservation & Development 5.8 7.2 7.4 6.2 6.2 6.4
9.9% 24.7% 2.8% -16.6% 0.4% 3.8%
Total (1) 273.5 265.0 249.4 273.4 289.9 309.8
0.5% -3.1% -5.9% 9.6% 6.0% 6.9%

(1) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

Read more forecasts from Reed Construction Data:

Construction Spending Improves in February
Nonresidential Building Construction Spending Partially Recovers in February
Single-family Construction Sends New Residential Spending Higher in February