Nonresidential construction spending declined marginally in August and is now projected to decline in before inflation dollars over the next year. This will be followed by two or three quarters of nominal spending gains while real spending continues to fall. Real, inflation adjusted, increases will not return until the last half of 2010. As always, the decline/rebound in the value of construction starts will be more pronounced than the change in construction spending at the job site.

Private commercial projects will be hit harder by the credit crunch than public or institutional buildings or heavy projects. This is the consequence of different funding sources. Private developers get their financing in the credit markets while other nonresidential project managers rely heavily on cash on hand from investment earnings or tax receipts.

Available credit is shrinking faster for private commercial construction. Added to this problem, the justification, expected rate of return, for commercial projects is also weakening more quickly with the slowing economy. Other nonresidential projects are justified by capacity needs for public services which change only slowly and marginally with economic conditions.

U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)

* 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 are seasonally adjusted at annual rates (SAAR figures).
Actuals: U.S. Census Bureau (Department of Commerce) (put-in-place investment figures).
Forecasts and table: Reed Construction Data.