Spending declines begin soon for nonresidential building and heavy project markets
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RSS FeedDecember construction spending was 0.7% below the peak level in June for nonresidential buildings and 1.4% below the peak level in November for heavy projects. However this is not yet a decline in the volume of construction work because of the collapse of construction materials prices in the last half of 2008. Materials costs fell 9% for nonresidential buildings, 17% for highways and 11% for other heavy projects. These large price cuts offset small gains in labor costs and gains, if any, in off-site project costs.
Nonetheless the recent slide in the value of construction starts reported by Reed Construction Data and the end of materials price cuts during the winter assure declining construction activity for most of 2009.
The infrastructure stimulus plan is still under debate but the $120 billion for nonresidential buildings and heavy projects remains in the proposal although many non-construction parts of the plan have proved to be controversial and may be dropped or reduced. There is still a risk that construction funds could be cut because it is clear that they will not be spent for economic stimulus as quickly as alternatives, such as tax reductions.
We will revisit the forecast when the stimulus plan is final. A small upward revision for 2010 is possible for institutional buildings, highways, power and water projects.
U.S. Non-building (Heavy Engineering) Construction
(billions of U.S. current dollars)
| Monthly Figures* (latest actual values) |
Annual Figures | ||||||
| Actual | Forecast | ||||||
| Nov-08 | Dec-08 | 2006 | 2007 | 2008 | 2009 | 2010 | |
| Transportation (% change is period versus same period, previous year) |
35.572 | 34.906 | 27.912 | 32.274 | 35.264 | 33.825 | 34.6875 |
| 4.1% | 0.6% | 11.8% | 15.6% | 9.3% | -4.1% | 2.5% | |
| Communication | 21.407 | 22.453 | 22.234 | 26.937 | 24.986 | 21.163 | 22.55 |
| -24.6% | -21.9% | 17.3% | 21.2% | -7.2% | -15.3% | 6.6% | |
| Power | 76.918 | 0.000 | 39.846 | 52.769 | 70.693 | 71.150 | 75.25 |
| 27.5% | 0.0% | 12.5% | 32.4% | 34.0% | 0.6% | 5.8% | |
| Highway | 84.329 | 82.260 | 71.789 | 75.309 | 79.690 | 82.550 | 87.15 |
| 9.1% | 6.1% | 12.2% | 4.9% | 5.8% | 3.6% | 5.6% | |
| Water and Sewer | 44.891 | 44.788 | 38.127 | 38.743 | 42.580 | 43.375 | 45.925 |
| 13.4% | 17.4% | 13.1% | 1.6% | 9.9% | 1.9% | 5.9% | |
| Conservation & Development | 5.607 | 6.259 | 5.101 | 5.219 | 5.322 | 5.428 | 5.74625 |
| -3.6% | 4.1% | 14.4% | 2.3% | 2.0% | 2.0% | 5.9% | |
| Total | 268.183 | 264.357 | 205.008 | 231.251 | 258.534 | 257.490 | 271.309 |
| 9.2% | 8.8% | 13.0% | 12.8% | 11.8% | -0.4% | 5.4% | |
* 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 | ||||||
| Nov-08 | Dec-08 | 2006 | 2007 | 2008 | 2009 | 2010 | |
| Lodging (% change is period versus same period, previous year) |
38.014 | 37.939 | 17.984 | 28.602 | 37.091 | 37.425 | 38.888 |
| 13.0% | 18.1% | 40.1% | 59.0% | 29.7% | 0.9% | 3.9% | |
| Office | 73.627 | 73.106 | 54.170 | 64.702 | 72.628 | 71.500 | 72.450 |
| 5.5% | 7.1% | 18.1% | 19.4% | 12.2% | -1.6% | 1.3% | |
| Commercial (mainly retail) | 79.646 | 78.451 | 76.673 | 88.478 | 85.944 | 76.125 | 80.600 |
| -14.1% | -11.5% | 9.1% | 15.4% | -2.9% | -11.4% | 5.9% | |
| Health Care | 48.186 | 48.561 | 38.489 | 42.904 | 46.362 | 46.600 | 49.675 |
| 6.9% | 9.1% | 11.8% | 11.5% | 8.1% | 0.5% | 6.6% | |
| Education | 105.596 | 104.814 | 85.081 | 96.085 | 104.020 | 102.450 | 105.450 |
| 3.5% | 4.2% | 6.9% | 12.9% | 8.3% | -1.5% | 2.9% | |
| Religious | 7.496 | 7.568 | 7.746 | 7.454 | 7.111 | 6.687 | 6.450 |
| 8.0% | 5.6% | 0.0% | -3.8% | -4.6% | -6.0% | -3.6% | |
| Public Safety | 14.377 | 14.478 | 7.800 | 9.869 | 12.574 | 12.863 | 12.038 |
| 29.5% | 31.8% | 7.1% | 26.5% | 27.4% | 2.3% | -6.4% | |
| Amusement/Recreation | 22.439 | 21.831 | 18.990 | 21.610 | 22.943 | 21.163 | 21.850 |
| -0.7% | -5.6% | 24.4% | 13.8% | 6.2% | -7.8% | 3.2% | |
| Manufacturing | 73.536 | 75.734 | 34.056 | 39.401 | 57.421 | 70.598 | 63.975 |
| 35.0% | 43.0% | 17.3% | 15.7% | 45.7% | 22.9% | -9.4% | |
| Total | 462.917 | 462.482 | 342.045 | 402.242 | 452.694 | 445.410 | 451.375 |
| 7.3% | 8.3% | 12.8% | 17.6% | 12.5% | -1.6% | 1.3% | |
* 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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What is driving the large increase in manufacturing spend? This surprises me since overall spending is down, unemployment is up etc.