Heavy Engineering Construction Stumbles in June

08/21/2012 by Bernard M. Markstein

Heavy engineering (non-building) construction spending slipped 0.2% on a seasonally adjusted (SA) basis in June after rising 0.4% in May. On a year-to-date, not seasonally adjusted (NSA) basis, heavy engineering spending increased 11.0% from 2011. Three of the major heavy engineering spending categories were up for the month — transportation (+2.6%), communication (+4.3%), and highway (+1.5%) construction spending. On a year-to-date basis just two construction spending categories were up compared to a year ago — power (+38.0%) and highway (+3.0%).

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)
  Apr-12 May-12 Jun-12 Apr-12 May-12 Jun-12 Jan-10 to
Jun-11
Jan-11 to
Jun-12
Transportation 35.0 35.9 36.9 33.6 34.6 35.9 16.4 16.2
  Month-over-Month
  % Change
6.7% 2.7% 2.6% 0.4% 2.9% 3.9%    
  Year-over-year
  % Change (NSA)
-1.3% 3.0% 4.4%       -8.8% -1.3%
Communication 16.9 16.9 17.7 16.9 16.9 17.2 8.3 8.1
  -0.6% 0.1% 4.3% -1.0% 0.2% 1.3%    
  -5.2% 0.3% -4.8%       0.2% -2.3%
Power 94.1 93.7 90.8 94.5 94.0 92.9 32.6 44.9
  -0.1% -0.4% -3.1% -2.3% -0.5% -1.2%    
  38.2% 34.0% 20.2%       -3.8% 38.0%
Highway 79.6 79.4 80.6 78.3 78.9 79.9 31.3 32.2
  2.3% -0.2% 1.5% 1.5% 0.8% 1.2%    
  6.7% 7.6% 3.3%       -5.8% 3.0%
Water and Sewer 35.8 36.0 35.8 36.5 36.1 35.9 17.3 17.2
  -1.4% 0.4% -0.7% -1.8% -1.2% -0.5%    
  -0.8% 1.8% -2.9%       -9.8% -0.8%
Conservation & Development 6.1 6.5 6.2 6.2 6.3 6.3 3.6 2.9
  -3.6% 6.2% -4.0% 0.7% 2.2% -0.6%    
  -18.4% -14.0% -20.6%       11.2% -20.0%
Total (2) 267.5 268.5 267.9 266.0 266.8 267.9 109.5 121.5
  1.1% 0.4% -0.2% -0.6% 0.3% 0.4%    
  11.8% 12.4% 6.0%       -5.4% 11.0%

(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

Reduction in government funding for infrastructure projects continues to be the biggest negative for 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. Recent enactment of legislation providing transportation funding through September 2014 allows some longer-term projects to proceed. The results of that increased spending should show up in the next few months.

Taking all these factors into consideration, the forecast is for heavy engineering projects construction spending to increase 8.2% in 2012 and 4.2% in 2013.

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

  Actual Forecast
  2008 2009 2010 2011 2012 2013
Transportation 35.5 36.7 38.3 34.9 36.3 40.5
   Year-over-year % Change 11.3% 3.5% 4.5% -9.1% 4.1% 11.7%
Communication 26.5 19.8 17.7 17.5 17.6 19.7
-4.0% -25.4% -10.2% -1.1% 0.7% 11.9%
Power 81.1 88.9 77.9 74.0 93.2 90.6
  22.7% 9.6% -12.3% -5.1% 26.0% -2.9%
Highway 81.4 82.2 82.5 78.9 80.3 87.4
6.1% 1.0% 0.4% -4.4% 1.8% 8.8%
Water and Sewer 42.4 40.3 41.3 36.8 36.2 36.7
  4.4% -5.1% 2.5% -11.0% -1.5% 1.4%
Conservation & Development 5.2 5.8 7.2 7.4 6.2 6.4
-0.5% 9.9% 24.7% 2.8% -15.6% 2.1%
Total (1) 272.1 273.5 265.0 249.4 270.0 281.3
9.7% 0.5% -3.1% -5.9% 8.2% 4.2%

(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 Up for Third Consecutive Month
Nonresidential Building Construction Rises for the Second Month in a Row
New Residential Construction Spending Continues Upward