Spending growth ends in nonresidential building and heavy project markets
Jim Haughey
 |
Seed Newsvine |
Revisions have cancelled the earlier report of declining spending for nonresidential buildings and heavy projects. Nonetheless, spending growth has stalled in both markets. Construction spending since November is up only 1.2% for nonresidential buildings and 0.2% for heavy projects. This gain does not cover cost increases which have recently accelerated. Materials cost increased 3.6% for nonresidential buildings and 4.5% for heavy projects. The volume of work at job sites continues to decline slowly and is expected to decline further through the spring.
The period of decline may be longer for private buildings constructed for leasing. Then rising spending will resume at about a 7% annual pace for nonresidential buildings and 9-10% for heavy projects. The forecast represents very modest real growth after inflation, nor quite keeping pace with overall growth in the economy.
Commercial developers are slowing some ongoing projects and delaying some new project starts until they are more certain that they can lease them for an acceptable rate of return. No significant drop in construction activity is expected because the commercial market is not overbuilt as it was at the onset of recent recessions. A short, shallow recession will not prevent resumed growth later this year.
The institutional building market is stalled at the September 2007 level as the result of very cautious spending budgets adopted by most states for the current fiscal year after three years of booming public spending growth. The budgets are too grim for the recession scenario in the forecast so some relaxation of spending restraints in expected this spring.
Spending in the heavy construction market is also stalled at the September 2007 level. This is a combination of shortages in many highway trust funds, and a cut back on power facility construction in anticipation of slower expansion of electricity demand during the recession period. Tighter public budgets and the end to more than three years of rising corporate profits also contribute to the stall.
U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)
| Monthly Figures* (latest actual values) |
|||||||
| Actual | Forecast | ||||||
| Feb-08 | Mar-08 | 2005 | 2006 | 2007 | 2008 | 2009 | |
| Transportation (% change is period versus same period, previous year) |
33.351 | 33.270 | 24.959 | 26.975 | 30.953 | 35.378 | 41.063 |
| 16.9% | 18.9% | -0.20% | 8.10% | 14.70% | 14.3% | 16.1% | |
| Communication | 27.130 | 30.666 | 18.948 | 21.672 | 26.106 | 29.305 | 31.225 |
| 9.0% | 20.5% | 23.10% | 14.40% | 20.50% | 12.3% | 6.6% | |
| Power | 54.694 | 55.077 | 35.403 | 39.256 | 49.432 | 57.22883 | 64.863 |
| 27.6% | 19.4% | -7.70% | 10.90% | 25.90% | 15.8% | 13.3% | |
| Highway | 79.393 | 79.887 | 63.956 | 71.611 | 76.911 | 81.30767 | 88.1 |
| 3.8% | 4.3% | 8.70% | 12.00% | 7.40% | 5.7% | 8.4% | |
| Water and Sewer | 39.525 | 39.967 | 33.726 | 37.905 | 40.027 | 40.853 | 43.975 |
| -3.4% | 1.4% | 10.40% | 12.40% | 5.60% | 2.1% | 7.6% | |
| Conservation & Development | 5.961 | 5.937 | 4.457 | 5.296 | 5.576 | 5.912 | 6.063 |
| 15.2% | 22.3% | 10.40% | 18.80% | 5.30% | 6.0% | 2.6% | |
| Total | 240.054 | 244.804 | 181.448 | 202.715 | 229.006 | 249.984 | 275.288 |
| 9.7% | 11.1% | 5.40% | 11.70% | 13.00% | 9.2% | 10.1% | |
* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
The total includes some miscellaneous buildings.
Actuals: U.S. Census Bureau, Department of Commerce (put-in-place investment figures).
Forecasts and table: Reed Research Group.
U.S. Nonresidential Construction
(billions of U.S. current dollars)
| Monthly Figures* (latest actual values) |
Annual Figures | ||||||
| Actual | Forecast | ||||||
| Feb-08 | Mar-08 | 2005 | 2006 | 2007 | 2008 | 2009 | |
| Lodging (% change is period versus same period, previous year) |
34,399 | 36,161 | 12,840 | 18,047 | 29,601 | 35,862 | 40450 |
| 50.95% | 68.92% | 3.85% | 40.56% | 64.02% | 21.15% | 12.79% | |
| Office | 69,832 | 70,795 | 45,857 | 54,617 | 65,146 | 71,814 | 78,975 |
| 11.30% | 25.49% | 8.44% | 19.10% | 19.28% | 10.24% | 9.97% | |
| Commercial (mainly retail) | 85,656 | 84,806 | 70,248 | 75,511 | 85,325 | 84,608 | 88,325 |
| 2.42% | 15.87% | 4.90% | 7.49% | 13.00% | -0.84% | 4.39% | |
| Health Care | 46,356 | 47,083 | 34,413 | 39,524 | 45,003 | 47,997 | 53,175 |
| 6.20% | 18.79% | 7.04% | 14.85% | 13.86% | 6.65% | 10.79% | |
| Education | 102,123 | 102,403 | 79,575 | 86,119 | 98,003 | 105,236 | 112,813 |
| 13.61% | 9.38% | 7.42% | 8.22% | 13.80% | 7.38% | 7.20% | |
| Religious | 6,707 | 6,495 | 7,743 | 7,699 | 7,493 | 7,002 | 7,695 |
| -13.95% | -4.27% | -5.07% | -0.57% | -2.67% | -6.55% | 9.89% | |
| Public Safety | 11,370 | 11,623 | 7,284 | 7,810 | 9,877 | 11,702 | 12,420 |
| 29.00% | 19.05% | 4.02% | 7.23% | 26.47% | 18.47% | 6.14% | |
| Amusement/Recreation | 21,154 | 21,799 | 15,268 | 18,214 | 20,406 | 22,776 | 25,338 |
| 13.66% | 16.74% | -8.50% | 19.30% | 12.03% | 11.62% | 11.24% | |
| Manufacturing | 45,539 | 46,140 | 30,012 | 34,341 | 37,972 | 46,068 | 44,425 |
| 26.72% | 9.59% | 26.53% | 14.42% | 10.57% | 21.34% | -3.57% | |
| Total | 423,136 | 427,305 | 303,239 | 341,882 | 398,820 | 433,064 | 463,615 |
| 13.18% | 17.47% | 7.00% | 12.74% | 16.65% | 8.59% | 7.05% | |
* Monthly figures are seasonally adjusted at annual rates (SAAR figures).
The total includes some miscellaneous state and local government buildings.
Actuals: U.S. Census Bureau (Department of Commerce) (put-in-place investment figures).
Forecasts and table: Reed Construction Data.
