Nonresidential building construction spending dropped 0.7% at a seasonally adjusted (SA) rate in July after slipping 0.1% in June (revised down from the originally reported 0.3% increase). On a year-to-date, not seasonally adjusted (NSA) basis, spending increased 8.4% compared to the same period in 2011.
“For lease” private projects spending fell 0.8% (SA) in July following a 0.1% decline in June. Year-to-date for lease spending increased 9.5% compared to a year ago. July lodging construction spending decreased 0.2% after jumping 3.6% in June. July office construction spending inched up 0.2% after increasing 0.4% in June (revised up from a 0.3% decline) and marking its third consecutive monthly increase. Retail construction spending plunged 1.8% after falling 1.4% in June. On a year-to-date basis, hotel construction spending increased 24.4%, office construction spending 4.1%, and retail construction spending 10.7%.
Construction spending for institutional projects edged down 0.1% in July after decreasing 0.2% in June. On a year-to-date basis, spending was up 2.2% from last year. Three of the categories in this group increased in June—health care (+0.4%), religious (+1.2%), and public safety (+0.7%). On a year-to-date basis, all of the institutional project categories were up over the same period last year except religious and amusement/recreation construction spending, which fell 7.1% and 1.0%, respectively.
Manufacturing construction spending plunged 2.2% in July, ending five consecutive months of increase. Further, June’s reported jump of 3.7% last month was revised down $2.4 billion (4.6% of the original number) to a much tamer increase of 0.5%. Nonetheless, year-to-date spending was up a robust 31.7% compared to last year. We will keep an eye on this measure to see if July was just a temporary blip on the radar screen or an indication of a more serious problem.
U.S. Nonresidential Construction | ||||||||
| Monthly Figures (1) (latest actual values) |
3-Month Moving Average | Year-to-Date (NSA) | ||||||
| May-12 | Jun-12 | Jul-12 | May-12 | Jun-12 | Jul-12 | Jan-10 to Jul-11 |
Jan-11 to Jul-12 |
|
| For Lease | 94.6 | 94.5 | 93.7 | 93.7 | 94.1 | 94.3 | 48.7 | 53.3 |
| Month-over-Month % Change |
1.6% | -0.1% | -0.8% | 1.7% | 0.4% | 0.2% | ||
| Year-over-year % Change (NSA) |
9.3% | 5.5% | 6.1% | -6.8% | 9.5% | |||
| Lodging | 11.0 | 11.3 | 11.3 | 11.0 | 11.1 | 11.2 | 5.0 | 6.3 |
| -0.6% | 3.6% | -0.2% | 4.1% | 0.7% | 0.9% | |||
| 27.9% | 23.8% | 32.6% | -30.3% | 24.4% | ||||
| Office | 36.1 | 36.3 | 36.3 | 35.8 | 36.0 | 36.2 | 19.7 | 20.5 |
| 1.6% | 0.4% | 0.2% | 1.7% | 0.4% | 0.7% | |||
| 4.5% | 1.5% | 6.4% | -11.5% | 4.1% | ||||
| Commercial (mainly retail) |
47.5 | 46.9 | 46.1 | 46.9 | 47.0 | 46.8 | 24.0 | 26.6 |
| 2.0% | -1.4% | -1.8% | 1.2% | 0.3% | -0.4% | |||
| 9.6% | 5.1% | 1.2% | 5.1% | 10.7% | ||||
| Institutional | 155.9 | 155.6 | 155.5 | 155.8 | 155.6 | 155.7 | 87.2 | 89.1 |
| 0.5% | -0.2% | -0.1% | -0.4% | -0.1% | 0.1% | |||
| 3.0% | -0.4% | -0.4% | -6.3% | 2.2% | ||||
| Health Care | 41.3 | 41.1 | 41.3 | 40.8 | 41.1 | 41.2 | 22.6 | 23.5 |
| 1.0% | -0.5% | 0.4% | 0.2% | 0.8% | 0.3% | |||
| 6.3% | 1.6% | 1.9% | 1.4% | 3.7% | ||||
| Education | 84.0 | 84.1 | 83.9 | 84.7 | 84.2 | 84.0 | 47.4 | 48.4 |
| -0.6% | 0.1% | -0.3% | -0.7% | -0.6% | -0.3% | |||
| 1.4% | -1.3% | -1.3% | -8.1% | 2.1% | ||||
| Religious | 3.8 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 2.4 | 2.2 |
| -2.5% | 1.0% | 1.2% | -2.2% | -1.4% | -0.1% | |||
| -7.9% | -4.2% | -6.2% | -20.7% | -7.1% | ||||
| Public Safety | 10.6 | 10.5 | 10.6 | 10.5 | 10.5 | 10.6 | 5.6 | 6.0 |
| 3.4% | -1.3% | 0.7% | -1.0% | -0.3% | 25.8% | |||
| 5.8% | -1.1% | 6.7% | -15.1% | 6.1% | ||||
| Amusement/ Recreation |
16.2 | 16.1 | 15.9 | 15.8 | 15.9 | 16.0 | 9.1 | 9.0 |
| 3.8% | -0.6% | -1.1% | 0.7% | 0.5% | 0.7% | |||
| -3.1% | -2.8% | -1.1% | -3.5% | -1.0% | ||||
| Manufacturing | 50.5 | 50.8 | 49.6 | 49.0 | 50.0 | 50.3 | 20.9 | 27.5 |
| 3.9% | 0.5% | -2.2% | 2.0% | 2.0% | 0.7% | |||
| 32.2% | 15.4% | 18.1% | -15.8% | 31.7% | ||||
| Total (2) | 301.1 | 300.9 | 298.8 | 298.4 | 299.7 | 300.3 | 156.9 | 170.0 |
| 1.4% | -0.1% | -0.7% | 0.7% | 0.4% | 0.2% | |||
| 8.5% | 3.4% | 4.2% | -7.8% | 8.4% | ||||
(1) Monthly figures are seasonally adjusted at annual rates (SAAR figures). | ||||||||
The Forecast
The major risks to the construction spending forecast consist of the ongoing problems in Europe, the looming expiration of the Bush tax cuts at year’s end, the federal debt approaching the debt ceiling, and drastically higher oil prices for a prolonged period. Despite these risks, Reed Economics assumes the United States avoids a recession.
This month the forecast horizon is extended to 2014. Better U.S. economic growth, increased hiring and investment in new plant and equipment by companies due to higher demand, and continued low long-term interest rates underlie the Reed forecast. The forecast is for nonresidential construction spending to increase 6.2% in 2012, 7.0% in 2013, and 10.2% in 2014.
U.S. Nonresidential Construction | ||||||
| Actual | Forecast | |||||
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| For Lease | 131.5 | 88.9 | 87.1 | 94.5 | 101.8 | 111.8 |
| Year-over-year % Change | -31.0% | -32.4% | -2.1% | 8.5% | 7.7% | 9.9% |
| Lodging | 25.5 | 11.6 | 8.9 | 11.1 | 12.5 | 13.8 |
| -28.8% | -54.4% | -23.7% | 25.0% | 12.4% | 10.3% | |
| Office | 51.9 | 37.9 | 34.6 | 36.2 | 39.4 | 43.4 |
| -24.3% | -27.1% | -8.5% | 4.5% | 8.9% | 10.1% | |
| Commercial (mainly retail) | 54.1 | 39.5 | 43.6 | 47.1 | 49.9 | 54.6 |
| -37.3% | -27.0% | 10.4% | 8.2% | 5.7% | 9.6% | |
| Institutional | 187.4 | 161.1 | 154.7 | 156.6 | 163.7 | 177.3 |
| -3.4% | -14.0% | -4.0% | 1.2% | 4.5% | 8.3% | |
| Health Care | 44.8 | 39.3 | 39.7 | 41.5 | 45.3 | 50.2 |
| -4.4% | -12.3% | 0.9% | 4.5% | 9.2% | 10.7% | |
| Education | 103.2 | 88.4 | 84.3 | 84.5 | 87.0 | 94.0 |
| -1.6% | -14.3% | -4.6% | 0.2% | 2.9% | 8.0% | |
| Religious | 6.2 | 5.3 | 4.2 | 3.9 | 4.0 | 4.3 |
| -14.3% | -14.6% | -20.1% | -6.8% | 2.5% | 6.9% | |
| Public Safety | 13.8 | 11.2 | 10.2 | 10.6 | 10.8 | 11.2 |
| 5.4% | -19.1% | -8.2% | 3.8% | 1.7% | 3.6% | |
| Amusement/Recreation | 19.4 | 16.9 | 16.2 | 16.0 | 16.5 | 17.7 |
| -11.1% | -12.7% | -4.5% | -1.1% | 3.1% | 7.3% | |
| Manufacturing | 56.8 | 40.4 | 41.4 | 49.8 | 56.3 | 65.4 |
| 6.8% | -29.0% | 2.6% | 20.2% | 13.2% | 16.2% | |
| Total (1) | 375.7 | 290.4 | 283.1 | 300.8 | 321.8 | 354.6 |
| -14.2% | -22.7% | -2.5% | 6.2% | 7.0% | 10.2% | |
(1) Total may not equal the sum of its components due to rounding. | ||||||
Read more forecasts from Reed Construction Data:
Construction Spending Stumbles in July
Heavy Engineering Construction Down Once More in July
New Residential Construction Spending Rises Again in July
