Nonresidential Building Construction Spending Continues to Struggle in May

07/23/2013 by Bernard M. Markstein

Nonresidential building construction spending dropped 1.5% at a seasonally adjusted (SA) rate in May following a 0.5% decline in April. On a year-to-date not seasonally adjusted (NSA) basis, nonresidential building construction spending was down 2.2%. 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.

“For lease” private projects spending slumped 1.3% (SA) in May, its third consecutive monthly decline. In spite of the recent reduction in spending, May year-to-date NSA for lease spending was up 2.5% over the same period in 2012. Lodging construction spending has been showing strength of late, increasing 1.3% in May following a 5.2% surge in April. Office construction spending decreased 0.6% after plunging 4.2% in April. Retail construction spending sank 2.5% in May after advancing 0.6% in April. On a year-to-date NSA basis, lodging spending was up 20.8%, office construction spending was down 2.7%, and retail construction spending was up 2.5% compared to the same period in 2012.

Construction spending for institutional projects rose 0.6% in May after slipping 0.2% in April. Year-to-date, NSA institutional spending was down 7.1% from the same period in 2012. Only amusement/recreation construction spending fell for the month, down 1.8% after increasing 1.0% in April. However, on a year-to-date basis, all of the categories for the group were down from 2012.

Manufacturing construction spending, which was generally increasing for over two years, plummeted 8.1% in May after decreasing 1.2% in April. Further, the Census Bureau reported significant downward revisions in the spending data going back to 2011. For 2011, spending was revised down $1.7 billion (-4.2% of the previously reported spending level). For 2012, spending was revised down $2.2 billion (-4.5% of the previously reported spending level). The downward 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 — $2.1 billion (-4.1%), February — $2.6 billion (-5.1%), March — $1.9 billion (-3.8%), and April — $1.2 billion (-2.4%). The revisions put a damper on the positive news that year-to-date NSA manufacturing construction spending was 4.7% higher than the same period in 2012.

U.S. Nonresidential 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
For Lease 97.5 96.9 95.7 96.8 97.4 96.7 37.3 38.2
  Month-over-Month
  % Change
-0.2% -0.6% -1.3% 0.1% 0.6% -0.7%    
  Year-over-year
  % Change (NSA)
2.2% 1.7% 0.8% 3.5% 2.9% 1.6% 11.8% 2.5%
     Lodging 12.9 13.5 13.7 12.2 12.9 13.4 4.4 5.3
  3.5% 5.2% 1.3% 0.3% 5.7% 3.3%    
  17.4% 19.5% 18.3% 22.2% 21.5% 18.4% 22.0% 20.8%
     Office 37.7 36.1 35.9 37.6 37.1 36.5 15.2 14.7
  0.6% -4.2% -0.6% -1.1% -1.4% -1.4%    
  -2.8% -3.6% -3.6% -2.1% -3.3% -3.3% 9.4% -2.7%
     Commercial
     (mainly retail)
47.0 47.3 46.1 47.0 47.4 46.8 17.7 18.1
  -1.8% 0.6% -2.5% 0.9% 0.9% -1.2%    
  2.6% 1.7% 0.1% 3.8% 3.6% 1.4% 11.7% 2.5%
Institutional 144.0 143.7 144.6 146.8 145.7 144.1 60.4 56.1
  -3.6% -0.2% 0.6% -1.3% -0.8% -1.1%    
  -7.9% -6.6% -6.9% -7.2% -7.2% -7.4% 2.7% -7.1%
     Health Care 40.0 40.6 40.8 40.6 40.6 40.5 17.0 16.4
  -2.9% 1.6% 0.5% -0.9% 0.0% -0.3%    
  -4.8% -3.1% -4.1% -3.4% -4.0% -4.0% 6.8% -3.5%
     Education 77.3 76.3 76.8 79.4 78.4 76.8 31.8 29.2
  -5.1% -1.3% 0.6% -1.9% -1.3% -2.0%    
  -9.6% -8.4% -8.3% -7.7% -7.9% -8.8% 2.6% -8.0%
     Religious 3.9 3.4 3.6 3.8 3.7 3.6 1.5 1.4
  5.5% -13.0% 7.2% 3.7% -2.4% -0.5%    
  -2.3% -10.9% -4.3% -6.0% -7.5% -5.8% -11.4% -6.6%
     Public Safety 9.2 9.7 9.9 9.3 9.4 9.6 4.3 3.8
  -2.7% 5.0% 2.0% -1.3% 1.3% 1.4%    
  -15.9% -7.4% -7.2% -15.4% -13.2% -10.1% 7.8% -12.1%
     Amusement/
     Recreation
13.7 13.8 13.6 13.8 13.7 13.7 5.9 5.4
  0.2% 1.0% -1.8% -0.7% -0.7% -0.2%    
  -7.6% -5.9% -11.2% -9.4% -8.2% -8.3% -6.6% -9.1%
Manufacturing 49.1 48.5 44.5 48.4 48.5 47.4 18.0 18.8
  2.0% -1.2% -8.1% -0.9% 0.3% -2.5%    
  6.9% 5.5% -5.4% 8.2% 6.5% 2.2% 35.4% 4.7%
Total (2) 290.6 289.1 284.8 292.0 291.7 288.2 115.7 113.2
  -1.6% -0.5% -1.5% -0.8% -0.1% -1.2%    
  -2.5% -2.0% -4.4% -1.4% -1.8% -3.0% 9.7% -2.2%

(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 nonresidential construction forecast for 2013 is for a 1.8% decrease in overall spending. The forecast for 2014 is for a gain of 7.4%, with all groups contributing to growth.

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

  Actual Forecast
  2009 2010 2011 2012 2013 2014
For Lease 131.5 88.9 88.5 96.2 97.9 105.6
   Year-over-year % Change -31.0% -32.4% -0.5% 8.6% 1.9% 7.8%
     Lodging 25.5 11.6 9.1 11.4 13.5 15.1
-28.8% -54.4% -21.5% 25.1% 18.0% 11.7%
     Office 51.9 37.9 36.0 38.4 37.0 39.4
  -24.3% -27.1% -4.9% 6.7% -3.8% 6.5%
     Commercial (mainly retail) 54.1 39.5 43.4 46.3 47.5 51.1
-37.3% -27.0% 10.0% 6.7% 2.6% 7.6%
Institutional 187.4 161.1 155.8 155.5 146.9 155.0
  -3.4% -14.0% -3.3% -0.2% -5.5% 5.5%
     Health Care 44.8 39.3 40.2 41.8 41.3 44.7
-4.4% -12.3% 2.2% 4.0% -1.3% 8.4%
     Education 103.2 88.4 85.0 84.6 78.4 81.6
  -1.6% -14.3% -3.9% -0.4% -7.3% 4.0%
     Religious 6.2 5.3 4.2 3.8 3.7 3.8
-14.3% -14.6% -19.8% -11.1% -2.2% 3.6%
     Public Safety 13.8 11.2 10.4 10.3 9.7 10.2
5.4% -19.1% -6.7% -1.1% -5.5% 5.2%
     Amusement/Recreation 19.4 16.9 16.0 15.0 13.8 14.7
-11.1% -12.7% -5.6% -6.4% -8.1% 6.5%
Manufacturing 56.8 40.4 39.7 46.9 48.3 54.2
  6.8% -29.0% -1.7% 18.1% 3.1% 12.2%
Total (1) 375.7 290.4 284.0 298.5 293.1 314.8
-14.2% -22.7% -2.2% 5.1% -1.8% 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 Advances in May
Heavy Engineering Construction Strengthens in May
New Residential Construction Spending Growth Continues to Slow in May