Nonresidential construction activity continues at a high level but has not expanded since last fall, after adjusting for project cost inflation, except for the construction of manufacturing facilities. Manufacturing construction spending was 21.5% higher in April than last September. Most of the increase in manufacturing construction is for process industries facilities. This means more pipes but very little more building space. Spending over the same period is up only 2% for nonresidential buildings and 3% for heavy projects where cost inflation is higher.
Manufacturing activity is near the peak as export growth begins to slow and US domestic demand for manufactured goods is no longer growing. Nonetheless, the nominal value of monthly construction spending will rise into the summer due to soaring cost increases for metals.
Spending in the heavy construction market is stalled at the September 2007 level, after adjusting for inflation. 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.
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.
U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)
| Monthly Figures* (latest actual values) |
|||||||
| Actual | Forecast | ||||||
| Mar-08 | Apr-08 | 2005 | 2006 | 2007 | 2008 | 2009 | |
| Transportation (% change is period versus same period, previous year) |
33.858 | 34.252 | 24.959 | 26.975 | 30.953 | 35.427 | 41.063 |
| 21.0% | 20.9% | -0.20% | 8.10% | 14.70% | 14.5% | 15.9% | |
| Communication | 29.124 | 27.363 | 18.948 | 21.672 | 26.106 | 28.980 | 31.225 |
| 14.4% | 11.7% | 23.10% | 14.40% | 20.50% | 11.0% | 7.7% | |
| Power | 56.826 | 57.542 | 35.403 | 39.256 | 49.432 | 59.24758 | 67.863 |
| 23.1% | 22.5% | -7.70% | 10.90% | 25.90% | 19.9% | 14.5% | |
| Highway | 80.302 | 80.301 | 63.956 | 71.611 | 76.911 | 82.13817 | 88.9475 |
| 4.8% | 4.7% | 8.70% | 12.00% | 7.40% | 6.8% | 8.3% | |
| Water and Sewer | 40.277 | 40.096 | 33.726 | 37.905 | 40.027 | 40.907 | 43.975 |
| 2.2% | 0.7% | 10.40% | 12.40% | 5.60% | 2.2% | 7.5% | |
| Conservation & Development | 5.704 | 5.490 | 4.457 | 5.296 | 5.576 | 5.852 | 6.063 |
| 17.5% | 10.4% | 10.40% | 18.80% | 5.30% | 4.9% | 3.6% | |
| Total | 246.091 | 245.044 | 181.448 | 202.715 | 229.006 | 252.552 | 279.135 |
| 11.6% | 10.7% | 5.40% | 11.70% | 13.00% | 10.3% | 10.5% | |
* 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 | ||||||
| Mar-08 | Apr-08 | 2005 | 2006 | 2007 | 2008 | 2009 | |
| Lodging (% change is period versus same period, previous year) |
36,140 | 38,458 | 12,840 | 18,047 | 29,601 | 37,316 | 42575 |
| 39.50% | 59.46% | 3.85% | 40.56% | 64.02% | 26.06% | 14.09% | |
| Office | 71,974 | 72,142 | 45,857 | 54,617 | 65,146 | 72,232 | 78,975 |
| 16.21% | 18.63% | 8.44% | 19.10% | 19.28% | 10.88% | 9.34% | |
| Commercial (mainly retail) | 83,995 | 85,532 | 70,248 | 75,511 | 85,325 | 86,557 | 91,325 |
| 0.01% | 18.94% | 4.90% | 7.49% | 13.00% | 1.44% | 5.51% | |
| Health Care | 46,964 | 47,406 | 34,413 | 39,524 | 45,003 | 48,016 | 53,175 |
| 6.06% | 17.06% | 7.04% | 14.85% | 13.86% | 6.69% | 10.75% | |
| Education | 103,234 | 103,118 | 79,575 | 86,119 | 98,003 | 105,328 | 112,813 |
| 10.78% | 14.02% | 7.42% | 8.22% | 13.80% | 7.47% | 7.11% | |
| Religious | 6,886 | 7,046 | 7,743 | 7,699 | 7,493 | 7,079 | 7,695 |
| -9.83% | -0.54% | -5.07% | -0.57% | -2.67% | -5.52% | 8.70% | |
| Public Safety | 11,722 | 11,795 | 7,284 | 7,810 | 9,877 | 11,845 | 12,614 |
| 27.75% | 19.13% | 4.02% | 7.23% | 26.47% | 19.92% | 6.49% | |
| Amusement/Recreation | 21,948 | 21,557 | 15,268 | 18,214 | 20,406 | 22,508 | 24,763 |
| 11.87% | 11.37% | -8.50% | 19.30% | 12.03% | 10.30% | 10.02% | |
| Manufacturing | 44,532 | 46,186 | 30,012 | 34,341 | 37,972 | 45,907 | 44,425 |
| 26.20% | 7.16% | 26.53% | 14.42% | 10.57% | 20.92% | -3.23% | |
| Total | 427,395 | 433,240 | 303,239 | 341,882 | 398,820 | 436,788 | 468,359 |
| 12.17% | 17.45% | 7.00% | 12.74% | 16.65% | 9.52% | 7.23% | |
* 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.
Member Comments
This in response to Brian’s comments posted on 6/18/2008. The reference to “current dollars” in the tables means the figures have NOT been adjusted for inflation. So the tables and text are consistent.
The text describes a fairly bleak outlook for non-residential and heavy markets, but the tables seem to support 7%-10% (overall) year over year growth into the future. I assume the reference “current dollars” means the forecast spending levels are inflation adjusted, so the growth figures in each table are in real terms. The tables seem to support a different conclusion than the text, particularly with respect to heavy markets. Clearly, the growth rates are lower than in previous years, but they are positive. Am I missing something?
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