Spending now declining in nonresidential building and heavy project markets

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spending now declining in nonresidential building and heavy project markets

December 08, 2008 - Jim Haughey

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October construction spending was down about 1% from the peak level earlier in the summer for both nonresidential buildings and heavy projects. Nonresidential building activity will decline modestly for about a year; the decline in the heavy market will be shorter and slightly less because of the expected boost an early 2009 economic stimulus spending program which will provide new funds for highways and other civil projects.

The shock of the credit freeze cut starts of private “for lease” projects 44% in October from September. Total starts fell nearly 8%. A share of this will return later this year but the total starts trend is now down at a 5-10% annual pace. Retail is the weakest market now but will recover first because it has been in decline since early 2008 when real consumer spending growth ended. Hospital construction will weather the recession best because hospital revenues will expand throughout the recession.

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

	Monthly Figures* (latest actual values)		Annual Figures
	Monthly Figures* (latest actual values)		Actual		Forecast
	Sept-08	Oct-08	2006	2007	2008	2009	2010
Transportation (% change is period versus same period, previous year)	35.637	35.884	27.912	32.274	35.159	34.825	35.6875
	4.3%	3.9%	11.8%	15.6%	8.9%	-0.9%	2.5%
Communication	23.360	22.439	22.234	26.937	24.987	21.238	22.55
	-16.6%	-20.5%	17.3%	21.2%	-7.2%	-15.0%	6.2%
Power	76.303	71.721	39.846	52.769	69.384	70.150	75.25
	34.0%	22.3%	12.5%	32.4%	31.5%	1.1%	7.3%
Highway	82.674	81.977	71.789	75.309	79.205	82.750	88.175
	5.6%	7.0%	12.2%	4.9%	5.2%	4.5%	6.6%
Water and Sewer	43.891	44.053	38.127	38.743	42.172	43.525	45.975
	11.3%	10.6%	13.1%	1.6%	8.9%	3.2%	5.6%
Conservation & Development	4.847	5.180	5.101	5.219	5.207	5.398	5.74625
	-9.4%	-9.7%	14.4%	2.3%	-0.2%	3.7%	6.5%
Total	266.712	261.254	205.008	231.251	256.112	257.885	273.384
	10.1%	7.2%	13.0%	12.8%	10.8%	0.7%	6.0%

* 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
	Monthly Figures* (latest actual values)		Actual		Forecast
	Sept-08	Oct-08	2006	2007	2008	2009	2010
Lodging (% change is period versus same period, previous year)	39.064	39.292	17.984	28.602	37.239	38.325	39.888
	22.6%	18.3%	40.1%	59.0%	30.2%	2.9%	4.1%
Office	75.270	76.511	54.170	64.702	73.261	74.500	75.450
	12.2%	8.9%	18.1%	19.4%	13.2%	1.7%	1.3%
Commercial (mainly retail)	80.751	81.794	76.673	88.478	85.910	78.125	82.750
	-12.0%	-11.2%	9.1%	15.4%	-2.9%	-9.1%	5.9%
Health Care	46.709	46.718	38.489	42.904	45.704	46.050	49.675
	6.3%	3.9%	11.8%	11.5%	6.5%	0.8%	7.9%
Education	106.176	107.317	85.081	96.085	104.218	105.025	108.200
	7.2%	9.5%	6.9%	12.9%	8.5%	0.8%	3.0%
Religious	6.960	6.790	7.746	7.454	6.866	6.325	6.450
	-8.4%	-6.2%	0.0%	-3.8%	-7.9%	-7.9%	2.0%
Public Safety	12.838	12.757	7.800	9.869	12.285	12.050	12.038
	22.3%	24.1%	7.1%	26.5%	24.5%	-1.9%	-0.1%
Amusement/Recreation	23.073	23.819	18.990	21.610	23.206	22.163	22.850
	0.9%	6.1%	24.4%	13.8%	7.4%	-4.5%	3.1%
Manufacturing	68.836	69.496	35.113	42.538	62.102	65.800	61.275
	58.4%	53.3%	17.0%	21.1%	46.0%	6.0%	-6.9%
Total	459.677	464.494	342.045	402.242	450.790	448.363	458.575
	10.0%	9.6%	12.8%	17.6%	12.1%	-0.5%	2.3%

* 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.

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