Nonresidential Building Construction Spending Sinks in March

05/28/2013 by Bernard M. Markstein

Nonresidential building construction spending tumbled 2.2% at a seasonally adjusted (SA) rate in March, after rising 1.3% in February. On a year-to-date not seasonally adjusted (NSA) basis, nonresidential building construction spending declined 0.8%.

“For lease” private projects spending fell 2.0% (SA) in March after rising 1.4% in February. Year-to-date, March for lease spending was up 4.7% (NSA) over the same period in 2012. Lodging construction spending increased 1.6% in March following a 9.1% surge in February. Office construction spending decreased 2.0% after edging up 0.2% in February. Retail construction spending was down 2.8% in March following a 0.5% advance in February. On a year-to-date NSA basis, lodging spending was up a strong 17.9%, office construction spending was up 5.0%, and retail construction spending was up a more modest 1.3% compared to the same period in 2012.

Construction spending for institutional projects was 2.6% lower in March after increasing 1.8% in February. Year-to-date, institutional spending was down 6.6% (NSA) from 2012. Only religious construction spending, the smallest spending category in this group, increased in March, up 2.0% after declining 0.5% in February. On a year-to-date basis, all of the categories for the group were lower than in 2012.

Manufacturing construction spending fell for the third month in a row, down 1.2% in March after slipping 0.3% in February. However, year-to-date manufacturing construction spending was up 7.4% from 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)
  Jan-13 Feb-13 Mar-13 Jan-13 Feb-13 Mar-13 Jan-12 to
Mar-12
Jan-13 to
Mar-13
For Lease 96.1 97.5 95.6 96.3 96.5 96.4 21.1 22.1
  Month-over-Month
  % Change
0.1% 1.4% -2.0% -0.8% 0.3% -0.2%    
  Year-over-year
  % Change (NSA)
5.5% 7.3% 1.6% 6.3% 6.0% 4.7% 12.1% 4.7%
     Lodging 11.2 12.2 12.4 11.4 11.7 11.9 2.5 3.0
  -3.5% 9.1% 1.6% -1.8% 2.7% 2.3%    
  16.5% 26.5% 11.7% 17.5% 19.6% 17.9% 18.1% 17.9%
     Office 37.5 37.5 36.8 37.8 37.7 37.3 8.1 8.6
  -1.3% 0.2% -2.0% -0.7% -0.4% -1.0%    
  7.5% 6.5% 1.2% 8.4% 7.2% 5.0% 4.0% 5.0%
     Commercial
     (mainly retail)
47.5 47.7 46.4 47.1 47.2 47.2 10.4 10.5
  2.2% 0.5% -2.8% -0.7% 0.2% 0.0%    
  1.3% 3.4% -0.7% 2.0% 1.8% 1.3% 17.9% 1.3%
Institutional 146.9 149.6 145.7 149.4 149.0 147.4 34.8 32.5
  -2.4% 1.8% -2.6% -1.6% -0.3% -1.1%    
  -5.5% -4.0% -5.9% -5.1% -6.0% -6.6% 4.7% -6.6%
     Health Care 39.4 40.1 39.3 39.7 39.8 39.6 9.6 9.3
  -1.4% 1.8% -2.0% -1.1% 0.3% -0.5%    
  -2.5% -2.9% -2.0% -2.1% -2.6% -2.5% 4.3% -2.5%
     Education 79.8 82.2 79.7 81.4 81.4 80.6 18.3 17.1
  -2.9% 2.9% -3.1% -1.4% 0.0% -1.1%    
  -7.2% -4.6% -7.9% -4.9% -5.4% -6.6% 5.7% -6.6%
     Religious 3.8 3.8 3.8 3.7 3.8 3.8 1.0 0.9
  1.2% -0.5% 2.0% -1.3% 0.8% 0.9%    
  -9.7% -11.2% -5.9% -8.7% -10.0% -9.0% -7.9% -9.0%
     Public Safety 9.3 9.6 9.1 9.4 9.5 9.3 2.5 2.1
  -2.4% 3.2% -5.9% -1.5% 0.7% -1.8%    
  -12.3% -12.2% -15.3% -11.8% -12.2% -13.3% 10.1% -13.3%
     Amusement/
     Recreation
14.5 13.9 13.8 15.1 14.5 14.1 3.6 3.1
  -3.6% -4.3% -0.8% -4.3% -4.2% -2.9%    
  -10.9% -13.9% -13.6% -8.5% -12.3% -12.8% 1.2% -12.8%
Manufacturing 50.2 50.0 49.4 51.1 51.1 49.9 10.7 11.5
  -5.3% -0.3% -1.2% 0.5% -0.2% -2.3%    
  12.7% 6.3% 3.7% 9.5% 8.5% 7.4% 41.2% 7.4%
Total (2) 293.2 297.1 290.7 296.9 296.6 293.6 66.7 66.1
  -2.1% 1.3% -2.2% -1.0% -0.1% -1.0%    
  0.2% 0.3% -2.7% 0.9% 0.2% -0.8% 11.7% -0.8%

(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
Nonresidential construction spending has gotten off to a poor start this year but will improve in the second half of the year. The forecast is for 2013 to be essentially flat, edging up 0.2% this year. Given likely increases in construction costs for the year, this translates into a decline in real (inflation-adjusted) terms. The poor showing is due to the underperforming institutional group. For lease and manufacturing are showing more strength this year. The 2014 forecast is for a much improved increase of 8.3%, 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 87.1 94.7 98.8 107.0
   Year-over-year % Change -31.0% -32.4% -2.1% 8.7% 4.4% 8.3%
     Lodging 25.5 11.6 8.9 11.0 12.8 14.3
-28.8% -54.4% -23.7% 24.3% 16.2% 11.4%
     Office 51.9 37.9 34.6 36.6 38.0 40.9
  -24.3% -27.1% -8.5% 5.5% 3.9% 7.8%
     Commercial (mainly retail) 54.1 39.5 43.6 47.1 48.0 51.8
-37.3% -27.0% 10.4% 8.0% 2.0% 7.8%
Institutional 187.4 161.1 154.7 155.6 149.4 159.0
  -3.4% -14.0% -4.0% 0.6% -3.9% 6.4%
     Health Care 44.8 39.3 39.7 40.6 40.2 43.6
-4.4% -12.3% 0.9% 2.2% -0.9% 8.3%
     Education 103.2 88.4 84.3 84.9 81.8 86.5
  -1.6% -14.3% -4.6% 0.7% -3.7% 5.8%
     Religious 6.2 5.3 4.2 3.9 3.9 4.1
-14.3% -14.6% -20.1% -7.6% -0.7% 4.9%
     Public Safety 13.8 11.2 10.2 10.1 9.3 9.6
5.4% -19.1% -8.2% -0.9% -8.0% 3.2%
     Amusement/Recreation 19.4 16.9 16.2 16.0 14.2 15.2
-11.1% -12.7% -4.5% -1.1% -11.1% 6.9%
Manufacturing 56.8 40.4 41.4 49.0 51.7 58.8
  6.8% -29.0% 2.6% 18.5% 5.5% 13.6%
Total (1) 375.7 290.4 283.1 299.3 300.0 324.7
-14.2% -22.7% -2.5% 5.7% 0.2% 8.3%

(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 Ends the First Quarter on a Sour Note
Heavy Engineering Construction Slumps in March
New Residential Construction Spending Grows at a Slower Pace in March