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Latest News & Information

Construction Spending Continues to Struggle in February

Total Construction Spending and its Major Components
Despite a particularly challenging winter, construction activity has held up surprisingly well. Year-to-date (January and February) spending for all the major groups was higher than in 2013.

The U.S. Census Bureau reported that total construction spending rose 0.1% in February to $945.7 billion at a seasonally adjusted annual rate (SAAR). Year-to-date not seasonally adjusted (NSA) spending was up 8.9% from the same period a year ago.

Nonresidential building construction slipped 0.3% to $308.1 billion (SAAR) in February. January spending was revised up by $4.8 billion, 1.6% of the previously reported number. That was enough to revise the monthly percentage change for January from -1.0% to +0.1%. The revision also helped lift year-to-date NSA spending by 5.7% over the same period a year ago.

Heavy engineering (non-building) construction spending jumped 1.7% to $272.4 billion (SAAR) in February, a partial recovery from January’s 2.4% drop. January spending was originally reported as an increase (+0.4%), but was revised down by $6.7 billion, 2.5% of the previously reported number. Nonetheless, year-to-date NSA spending was up 6.1% from last year.

Total residential construction spending, which includes improvements, fell 0.7% in February to $365.2 billion (SAAR) after increasing 1.1% in January. New residential construction spending, which excludes improvements, declined 0.4% to $225.1 billion in February, its first decline since September 2011. Compared to the same period in 2013, year-to-date NSA total residential construction spending was up 14.5%, and new residential construction was up 18.9%.

U.S. Total Construction Spending
(billions of U.S. current dollars)

  Current Monthly (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA)
  Dec-13 Jan-14 Feb-14 Dec-13 Jan-14 Feb-14 Jan-12 to
Feb-13
Jan-13 to
Feb-14
New Single-family 180.6 185.3 183.3 176.2 180.6 183.1 21.0 24.8
  Month-over-Month % Change 2.7% 2.6% -1.1% 1.6% 2.5% 1.4%    
  Year-over-year % Change (NSA) 21.2% 21.2% 14.8% 19.3% 20.3% 19.1% 33.0% 18.0%
New Multifamily (2) 41.5 40.7 41.8 40.9 41.1 41.3 5.1 6.3
  0.9% -2.0% 2.9% 2.3% 0.5% 0.6%    
  25.4% 21.7% 23.6% 34.5% 21.7% 22.6% 41.7% 22.6%
New Residential (3) 222.1 226.0 225.1 217.2 221.7 224.4 26.1 31.1
  2.3% 1.7% -0.4% 1.7% 2.1% 1.2%    
  22.0% 21.3% 16.5% 21.1% 21.3% 20.0% 34.6% 18.9%
Residential Improvements (4) 141.7 141.9 140.1 137.0 139.7 141.2 15.3 16.4
  4.5% 0.1% -1.3% 1.7% 2.0% 1.1%    
  19.5% 5.9% 8.3% 15.7% 11.1% 11.3% 5.5% 7.0%
Total Residential (5) (6) 363.8 367.8 365.2 354.1 361.4 365.6 41.4 47.4
  3.2% 1.1% -0.7% 1.7% 2.1% 1.2%    
  21.1% 15.5% 13.6% 18.9% 17.5% 16.8% 22.2% 14.5%
Nonresidential Building 308.7 309.0 308.1 310.4 309.6 308.6 43.0 45.5
  -0.8% 0.1% -0.3% 0.8% -0.3% -0.3%    
  4.6% 6.8% 4.5% 4.6% 5.8% 5.3% -0.8% 5.7%
Heavy Engineering (Non-Building) 274.2 267.7 272.4 268.1 268.8 271.4 33.1 35.1
  3.7% -2.4% 1.7% 0.6% 0.3% 1.0%    
  -9.8% 4.8% 7.5% -12.2% -9.1% -0.4% -3.7% 6.1%
Total (6) 946.7 944.6 945.7 932.6 939.9 945.7 117.5 128.0
  2.0% -0.2% 0.1% 1.1% 0.8% 0.6%    
  4.9% 9.3% 8.5% 3.5% 4.8% 7.5% 5.3% 8.9%

(1) Monthly levels are seasonally adjusted at annual rates (SAAR figures).
(2) New Multifamily = New Private Multifamily + New Public Multifamily - Public Improvements (estimated by Reed Economics)
(3) New Residential = New Single-family + New Multifamily
(4) Residential Improvements include remodeling, renovation and replacement work.
Number also includes Reed Economics estimate of improvements to public housing.
(5) Total Residential = New Single-family + New Multifamily + Residential Improvements.
(6) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce.

Both total public and private February construction spending inched up 0.1% at a seasonally adjusted (SA) rate. However, the year-to-date data continue the story of cutbacks in public construction spending, while private spending post increases. Year-to-date NSA public spending was down 2.0%, while total private construction spending was up 13.4%.

Public and Private Construction Spending
(billions of U.S. current dollars)

  Monthly Figures (1)
(latest actual values)
3-Month Moving Average Year-to-Date (NSA) Annual
  Dec-13 Jan-14 Feb-14 Dec-13 Jan-14 Feb-14 Jan-12 to
Feb-13
Jan-13 to
Feb-14
2011 2012 2013
Private Spending 677.7 679.1 680.0 659.6 670.5 678.9 83.3 94.5 501.6 577.9 628.5
  Month-over-Month % Change 3.5% 0.2% 0.1% 1.7% 1.7% 1.2%          
  Year-over-year % Change (NSA) 7.0% 13.7% 13.2% 5.1% 7.2% 11.0% 10.9% 13.4% 0.2% 15.2% 8.8%
Public Spending 269.0 265.5 265.7 273.0 269.3 266.7 34.2 33.6 286.4 279.0 271.4
  -1.6% -1.3% 0.1% -0.3% -1.4% -1.0%          
  -0.1% -1.4% -2.6% -0.4% -1.1% -1.3% -6.3% -2.0% -5.8% -2.6% -2.7%
   Total Federal Spending 23.4 22.5 23.8 23.5 23.0 23.2 3.5 3.4 31.7 27.4 23.5
  1.6% -4.1% 5.8% 1.3% -2.2% 1.0%          
  -10.5% -7.1% 1.9% -12.8% -10.8% -5.6% -16.2% -2.7% 1.7% -13.5% -14.1%
       Federal Nonresidential
       Spending
22.2 21.2 22.7 22.2 21.7 22.0 3.3 3.3 29.1 25.8 22.1
  2.3% -4.6% 6.9% 1.4% -2.1% 1.4%          
  -9.4% -6.0% 3.5% -12.8% -10.2% -4.4% -16.7% -1.3% 2.4% -11.4% -14.4%
       Federal Residential
       Spending
1.2 1.3 1.1 1.3 1.3 1.2 0.2 0.2 2.6 1.6 1.4
  -9.8% 5.5% -12.1% -1.3% -4.7% -5.7%          
  -26.9% -19.8% -24.1% -13.2% -20.4% -23.7% -8.4% -21.8% -5.7% -38.2% -9.2%
   Total State & Local Spending 245.6 243.1 241.9 249.5 246.3 243.5 30.7 30.1 254.8 251.7 247.9
  -1.9% -1.0% -0.5% -0.5% -1.3% -1.1%          
  1.2% -0.7% -3.1% 0.9% 0.0% -0.8% -5.0% -1.9% -6.6% -1.2% -1.5%
       State & Local
       Nonresidential Spending
241.5 239.7 238.2 245.3 242.4 239.8 30.1 29.6 248.8 247.0 243.4
  -1.8% -0.8% -0.6% -0.5% -1.2% -1.1%          
  1.4% -0.4% -3.0% 1.1% 0.2% -0.6% -4.6% -1.7% -6.2% -0.7% -1.4%
       State & Local Residential
       Spending
4.0 3.4 3.8 4.2 3.9 3.7 0.6 0.5 6.0 4.7 4.5
  -6.4% -16.9% 11.5% -1.5% -7.1% -4.9%          
  -7.7% -19.2% -8.7% -9.7% -12.7% -11.8% -19.5% -14.1% -21.3% -21.5% -4.4%

Monthly levels are seasonally adjusted at annual rates (SAAR figures).
Source: Census Bureau, U.S. Department of Commerce.

The Economy
The nation appears to be shaking off the effects of the difficult winter. The somewhat positive construction spending data and other economic data seem to support our view that the economy is still reasonably healthy and on an upward path. Although the Federal Reserve is reducing its purchases of long-term assets, interest rates remain low, encouraging investment. As always, there are risks to the economy and construction. These include:

  • A sustained spike in interest rates due to the Federal Reserve unwinding its asset purchase program too rapidly
  • Sharp reduction in government spending in the short run
  • Sovereign debt default by one or more European governments
  • One or more European governments abandon the euro
  • A sudden, significant increase in oil prices for a prolonged period

The Forecast
The Reed forecast assumes these risks do not occur, or if they do, their effects are minimal and the economy continues to strengthen and grows at a moderate pace this year and next. As a result of this, nonresidential building construction is expected to gain traction and improve this year and next.

Heavy engineering (non-building) construction is also expected to recover this year and be on better footing next year. More federal funding for infrastructure projects is likely to become available this year and next, although the amount is likely to be only a small down payment on what the nation truly needs. The amount of public money available for projects will be a major factor in determining infrastructure construction activity. This limiting factor will be offset by public-private partnerships at the state and local level.

Total construction spending is forecast to increase 10.1% in 2014 and 11.5% in 2015, with nonresidential and heavy engineering construction strengthening and residential construction continuing its recovery.

U.S. Total Construction Spending
(billions of U.S. current dollars)

  Actual Forecast
  2009 2010 2011 2012 2013 2014 2015
New Single-family 105.3 112.6 108.2 132.0 168.8 201.6 244.6
   Year-over-year % Change -43.3% 6.9% -3.9% 22.0% 27.9% 19.4% 21.4%
New Multifamily (1) 35.9 24.1 22.7 27.8 37.4 43.1 47.3
-30.0% -32.9% -5.7% 22.6% 34.5% 15.2% 9.7%
New Residential (2) 141.2 136.7 130.9 159.9 206.3 244.7 291.9
  -40.4% -3.2% -4.2% 22.1% 29.0% 18.6% 19.3%
Residential Improvements (3) 112.7 112.5 121.8 126.7 131.6 145.5 159.7
-6.6% -0.2% 8.3% 4.0% 3.9% 10.6% 9.8%
Total Residential (4) (5) 253.9 249.1 252.7 286.5 337.8 390.2 451.7
-29.0% -1.9% 1.4% 13.4% 17.9% 15.5% 15.8%
Nonresidential Building 375.7 290.4 284.0 298.5 298.7 320.5 348.4
-14.2% -22.7% -2.2% 5.1% 0.1% 7.3% 8.7%
Heavy Engineering (Non-Building) 273.5 265.0 251.3 272.0 263.4 279.8 304.3
  0.5% -3.1% -5.2% 8.2% -3.2% 6.2% 8.8%
Total (5) 903.2 804.6 788.0 857.0 899.9 990.4 1,104.4
-15.4% -10.9% -2.1% 8.7% 5.0% 10.1% 11.5%

(1) New Multifamily = New Private Multifamily + New Public Multifamily - Public Improvements
(estimated by Reed Economics)
(2) New Residential = New Single-family + New Multifamily
(3) Residential Improvements include remodeling, renovation and replacement work.
Number also includes Reed Economics estimate of improvements to public housing.
(4) Total Residential = New Single-family + New Multifamily + Residential Improvements.
(5) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

Read more forecasts from Reed Construction Data:

Nonresidential Building Construction Comes up Short in February
Heavy Engineering Construction Stages a Partial Comeback in February
New Residential Construction Spending Falls for First Time in over Two Years

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