Construction spending declines in March
Jim Haughey
 |
Seed Newsvine |
Total construction spending fell 1.1% in March after it was revised up 0.7% in February. Construction spending is now 8.4% below the peak level in February 2006 with almost half of the decline occurring since last September when residential mortgage problems began to slow growth in nonresidential construction markets.
Contractors laid off 61,000 workers in April and cut work schedules so that total hours worked at job sites dropped 1.5%, assuring another decline in construction spending will be reported for April, probably May and possibly June. Then a slow upturn is expected fueled by the end of the housing recession at the job site and consumer tax rebates.
Construction spending is forecast to decline 1.1% in 2008, about a 4-5% volume decline after adjusting for rising project costs. A 9.3% gain is expected in 2009 which represents a 4-5% volume increase. The forecast assumes that the spending restraint on the core housing market and nonresidential projects from the recapitalization of banks and other lender after the subprime mortgage market collapse continue to taper off and become very small by yearend. The forecast also assumes that GDP growth resumes this summer at a subpar 2.0% pace with growth rising to near 3% late in 2009.
It is not yet certain that the recession will be this short and brief. Most of the risk to the forecast is on the downside. If consumer confidence is not rising from the March near record low level by spring, the recession will extend longer and construction spending will drop 3% or more in 2008.
U.S. Total Construction Spending
(billions of U.S. current dollars)
| Actual | Forecast | |||||
| 2003 | 2005 | 2006 | 2007 | 2008 | 2009 | |
| New Residential (% change | 350.1 | 485.0 | 476.6 | 359.8 | 269.1 | 310.9 |
| is year vs previous year) | 15.3% | 15.1% | -1.7% | -24.5% | -25.2% | 15.5% |
| Residential Improvements* | 129.7 | 160.9 | 172.9 | 174.0 | 195.2 | 203.9 |
| 6.1% | 9.4% | 7.4% | 0.6% | 12.2% | 4.4% | |
| Non-residential Building | 269.3 | 303.2 | 341.9 | 398.8 | 433.1 | 463.6 |
| -2.3% | 7.0% | 12.7% | 16.7% | 8.6% | 7.1% | |
| Non-building | 171.0 | 181.4 | 202.7 | 229.0 | 250.0 | 275.3 |
| (heavy engineering) | -0.3% | 5.4% | 11.7% | 13.0% | 9.2% | 10.1% |
| Total | 920.1 | 1130.6 | 1194.1 | 1161.6 | 1147.4 | 1253.7 |
| 5.4% | 10.4% | 5.6% | -2.7% | -1.2% | 9.3% | |
*Residential Improvements include remodeling, renovation and replacement work.
Actuals: U.S. Census Bureau, Department of Commerce.
Forecasts and table: Reed Construction Data.
