Nonresidential Building Construction Rises for the Second Month in a Row

08/21/2012 by Bernard M. Markstein

Nonresidential building construction spending advanced 0.3% at a seasonally adjusted (SA) rate in June after rising 1.4% in May. On a year-to-date, not seasonally adjusted (NSA) basis, spending increased 9.2% compared to the same period in 2011.

“For lease” private projects spending fell 0.7% (SA) in June following a healthy 1.2% rise in May. Year-to-date for lease spending increased 9.7% compared to a year ago. June lodging construction spending surged 3.7% after falling 1.1% in May. June office construction spending slipped 0.3% after rising 0.3% in May (revised up from a 1.5% drop). Retail construction spending dropped 1.9% after jumping 2.4% in May. On a year-to-date basis, hotel construction spending increased 22.8%, office construction spending 3.1%, and retail construction spending 12.4%.

Construction spending for institutional projects shrank 0.3% in June after rising 0.3% (revised up from a 1.5% fall). On a year-to-date basis, spending was up 2.6% from last year. Three of the categories in this group increased in June — health care (+0.4%), religious (+0.7%), and amusement and recreation (+1.4%). However, on a year-to-date basis all of these categories were up compared to the same period in 2011 except religious and amusement/recreation construction spending, which were down 8.0% and 1.8%, respectively.

Manufacturing construction spending climbed 3.7% in June after surging 5.5% in May, posting its fifth consecutive monthly increase. Meanwhile, year-to-date spending was up a solid 35.8% compared to last year.

U.S. Nonresidential 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
For Lease 93.2 94.3 93.6 92.1 93.6 93.7 41.1 45.0
  Month-over-Month
  % Change
-0.2% 1.2% -0.7% 0.6% 1.6% 0.1%    
  Year-over-year
  % Change (NSA)
10.7% 8.6% 4.0%       -8.7% 9.7%
     Lodging 11.0 10.9 11.3 10.6 11.0 11.1 4.3 5.3
  -0.9% -1.1% 3.7% 4.6% 3.9% 0.6%    
  32.1% 27.3% 23.3%       -31.3% 22.8%
     Office 35.5 35.6 35.5 35.2 35.7 35.6 16.8 17.3
  -0.7% 0.3% -0.3% 0.4% 1.3% -0.2%    
  4.8% 3.0% -0.8%       -12.5% 3.1%
     Commercial
     (mainly retail)
46.6 47.7 46.8 46.3 46.9 47.0 20.0 22.5
  0.4% 2.4% -1.9% -0.1% 1.3% 0.3%    
  11.2% 9.4% 4.1%       2.4% 12.4%
Institutional 155.2 155.7 155.3 156.3 155.7 155.4 72.8 74.6
  -0.6% 0.3% -0.3% -0.6% -0.4% -0.2%    
  2.4% 3.2% -0.6%       -6.5% 2.6%
     Health Care 40.9 41.6 41.8 40.7 40.9 41.5 19.2 20.1
  1.9% 1.8% 0.4% 0.3% 0.5% 1.4%    
  3.7% 6.9% 3.6%       0.7% 4.5%
     Education 84.5 84.0 83.2 85.3 84.7 83.9 39.0 40.0
  -1.1% -0.6% -0.9% -0.6% -0.7% -0.9%    
  1.7% 1.5% -2.4%       -8.2% 2.6%
     Religious 3.9 3.7 3.8 4.0 3.9 3.8 2.1 1.9
  -2.7% -4.6% 0.7% -2.3% -2.9% -2.3%    
  -7.6% -10.0% -6.6%       -21.0% -8.0%
     Public Safety 10.3 10.6 10.5 10.6 10.5 7.9 4.8 5.1
  -2.8% 3.3% -0.9% -1.6% -1.0% -25.1%    
  2.6% 5.5% -1.0%       -16.2% 5.9%
     Amusement/
     Recreation
15.6 15.8 16.0 15.7 15.7 15.8 7.7 7.6
  -1.6% 1.3% 1.4% -1.8% -0.1% 0.3%    
  -2.7% -6.5% -3.9%       -3.5% -1.8%
Manufacturing 48.6 51.3 53.2 48.0 49.2 51.1 17.4 23.6
  1.8% 5.5% 3.7% 2.2% 2.6% 3.7%    
  44.2% 32.7% 21.0%       -19.0% 35.8%
Total (2) 297.0 301.3 302.1 296.4 298.5 300.2 131.2 143.2
  -0.1% 1.4% 0.3% 0.2% 0.7% 0.5%    
  9.9% 8.2% 3.6%       -9.1% 9.2%

(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
The chief risks to the construction spending forecast include the continuing problems in Europe, the expiration of the Bush tax cuts at the end of the year, the need to raise the federal debt ceiling, and the threat of significantly higher oil prices for a sustained period. Although these risks remain, RCD Economics assumes none of them worsens to the point that it derails the economy. Thus the forecast is for spending totals to strengthen throughout 2012 and 2013 as U.S. economic growth improves and companies increase hiring and investment in new plant and equipment in response to rising demand. Low long-term interest rates continue to be a positive for investment.

The forecast is for nonresidential construction spending to increase 6.4% in 2012 and to improve further in 2013, expanding 7.4%.

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

  Actual Forecast
  2008 2009 2010 2011 2012 2013
For Lease 190.6 131.5 88.9 87.1 94.6 103.1
   Year-over-year % Change 3.8% -31.0% -32.4% -2.1% 8.6% 9.0%
     Lodging 35.8 25.5 11.6 8.9 11.1 12.5
24.7% -28.8% -54.4% -23.7% 25.3% 12.8%
     Office 68.6 51.9 37.9 34.6 36.0 39.1
  5.1% -24.3% -27.1% -8.5% 3.8% 8.7%
     Commercial (mainly retail) 86.2 54.1 39.5 43.6 47.5 51.5
-3.9% -37.3% -27.0% 10.4% 9.0% 8.3%
Institutional 193.9 187.4 161.1 154.7 155.8 162.3
  8.1% -3.4% -14.0% -4.0% 0.7% 4.1%
     Health Care 46.9 44.8 39.3 39.7 42.0 46.1
7.2% -4.4% -12.3% 0.9% 5.6% 9.9%
     Education 104.9 103.2 88.4 84.3 83.6 85.4
  8.4% -1.6% -14.3% -4.6% -0.8% 2.0%
     Religious 7.2 6.2 5.3 4.2 3.8 3.7
-4.2% -14.3% -14.6% -20.1% -11.2% -1.8%
     Public Safety 13.1 13.8 11.2 10.2 10.6 10.7
28.3% 5.4% -19.1% -8.2% 3.2% 1.1%
     Amusement/Recreation 21.8 19.4 16.9 16.2 15.9 16.4
2.9% -11.1% -12.7% -4.5% -1.7% 3.4%
Manufacturing 53.2 56.8 40.4 41.4 50.8 58.1
  31.0% 6.8% -29.0% 2.6% 22.8% 14.3%
Total (1) 437.7 375.7 290.4 283.1 301.2 323.5
8.4% -14.2% -22.7% -2.5% 6.4% 7.4%

(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
Heavy Engineering Construction Stumbles in June
New Residential Construction Spending Continues Upward