Heavy Engineering Construction Strengthens in May

07/23/2013 by Bernard M. Markstein

Heavy engineering (non-building) construction spending rose for the third month in a row, up 1.9% on a seasonally adjusted (SA) basis in May following a 1.2% increase in April. Even with the recent increases in spending, year-to-date not seasonally adjusted (NSA) construction spending fell 2.1% from the same period in 2012.

The numbers incorporate the Census Bureau’s annual benchmark revision of the construction spending data over the previous two years (back to January 2011). See “Revisions to Construction Spending Data for 2011-13” for a brief commentary and tables showing the revisions.

The revisions included significant downward changes in the heavy engineering spending data for the first four months of this year. The revisions for 2013 in dollars at a seasonally adjusted annual rate (SAAR) and as a percent of the previously reported spending level were as follows: January — $18.6 billion (-6.9%), February — $10.6 billion (-4.0%), March — $3.0 billion (-1.2%), and April — $7.6 billion (-2.9%).

These large revisions were mainly due to major revisions in the power spending numbers, both in dollar and percentage terms. The SAAR power spending revisions for 2013 were as follows (all were downward revisions): January — $16.8 billion (-17.0%), February — $8.6 billion (-9.7%), March — $5.4 billion (-6.3%), and April — $11.8 billion (-12.8%). Communication construction spending suffered almost as large a downward percentage revision in January, down 13.9% (-$2.4 billion), and roughly half that in February, down 6.9% (-$1.1 billion).

For March and April, transportation construction spending posted the next largest revisions closely followed by highway construction spending. For both months, transportation construction spending was revised up $1.2 billion (+3.2%). For March, highway construction spending was revised up $1.1 billion (+1.4%), and for April, up $1.0 billion (+1.4%).

For May, only communication construction spending fell on a monthly basis, plunging 6.1%. On a year-to-date basis, only transportation construction spending increased, up 12.3% from the same period in 2012.

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)
  Mar-13 Apr-13 May-13 Mar-13 Apr-13 May-13 Jan-12 to
May-12
Jan-13 to
May-13
Transportation 40.0 40.2 41.7 39.7 39.9 40.6 13.5 15.1
  Month-over-Month
  % Change
1.4% 0.6% 3.7% 0.6% 0.5% 1.9%    
  Year-over-year
  % Change (NSA)
15.4% 13.9% 11.1% 12.1% 13.1% 13.3% 1.3% 12.3%
Communication 16.0 16.0 15.0 15.1 15.5 15.7 6.7 5.9
  9.8% -0.1% -6.1% -3.8% 2.7% 0.9%    
  -12.2% -3.6% -14.7% -15.5% -11.8% -10.3% -0.4% -12.9%
Power 80.5 80.8 83.1 80.9 80.4 81.5 32.7 31.9
  0.7% 0.4% 2.9% -10.3% -0.6% 1.3%    
  -3.7% 0.1% -0.4% -3.7% -3.3% -1.3% 24.6% -2.3%
Highway 77.5 77.8 78.5 77.0 77.4 77.9 25.0 23.9
  0.7% 0.5% 0.8% 0.8% 0.5% 0.7%    
  -5.1% -2.9% -6.0% -4.9% -5.6% -4.8% 6.4% -4.8%
Water and Sewer 33.7 35.8 37.2 34.1 34.7 35.6 14.1 13.4
  -2.6% 6.2% 4.0% -0.9% 1.8% 2.5%    
  -9.3% -1.0% 4.5% -9.5% -6.1% -1.8% -0.2% -4.7%
Conservation & Development 5.8 5.9 5.9 5.9 6.0 5.8 2.4 2.3
  -7.9% 1.5% 0.0% -1.4% 0.1% -2.3%    
  -14.1% -2.3% -8.9% -5.2% -5.0% -8.6% -22.6% -5.4%
Total (2) 253.4 256.5 261.4 252.7 253.9 257.1 94.4 92.4
  0.7% 1.2% 1.9% -3.6% 0.5% 1.3%    
  -3.1% 0.7% -1.1% -3.5% -2.7% -1.1% 8.5% -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 Forecast
Heavy engineering construction has improved over the past few months. However, previous reductions in public funding for projects have held down overall heavy engineering construction activity. Public-private partnerships have helped offset the loss of government funds. For the next few years, these partnerships are likely to dominate what had been the public project landscape. Meanwhile, the private sector is investing in its own heavy construction projects.

The Reed forecast is for heavy engineering construction spending to be down 4.1% this year and to increase of 6.7% 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 34.7 38.2 41.3 44.6
   Year-over-year % Change 3.5% 4.5% -9.4% 10.0% 8.2% 8.0%
Communication 19.8 17.7 17.7 17.5 15.6 16.7
-25.4% -10.2% -0.3% -0.9% -10.7% 6.9%
Power 88.9 77.9 75.2 94.1 83.0 89.8
  9.6% -12.3% -3.5% 25.1% -11.8% 8.3%
Highway 82.2 82.5 79.3 80.5 78.7 82.5
1.0% 0.4% -3.9% 1.5% -2.3% 4.8%
Water and Sewer 40.3 41.3 36.9 35.3 36.2 38.4
  -5.1% 2.5% -10.7% -4.3% 2.6% 6.1%
Conservation & Development 5.8 7.2 7.5 6.4 5.9 6.1
9.9% 24.7% 5.1% -15.8% -7.3% 3.3%
Total (1) 273.5 265.0 251.3 272.0 260.7 278.2
0.5% -3.1% -5.2% 8.2% -4.1% 6.7%

(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 Advances in May
Nonresidential Building Construction Spending Continues to Struggle in May
New Residential Construction Spending Growth Continues to Slow in May