Construction Economics Article from ABC (Associated Builders & Contractors)

January 3, 2012

Nonresidential Construction Spending Increases 0.9 Percent in November 2011

Summary


Total nonresidential construction spending increased 0.9 percent in November to a seasonally adjusted annual rate of $555.7 billion, according to the Jan. 3 report by the U.S. Commerce Department. However, total nonresidential spending is down 0.1 percent from one year ago. (see graph).

Private nonresidential construction spending was unchanged for the month, but is 4.5 percent higher than November 2010. Public nonresidential construction jumped 1.8 percent in November, but is still down 4.4 percent year-over-year.

Nine of the sixteen nonresidential construction subsectors posted increases in spending for the month, including power, up 5.1 percent; sewage and waste disposal, 3 percent higher; public safety, up 2 percent; health care, 1.9 percent higher; and highway and street construction, up 1.9 percent. Four subsectors experienced increases in spending from one year ago, including manufacturing construction, up 13.3 percent; commercial construction, 11.4 percent higher; power construction, up 6.5 percent; and education-related construction, 3.9 percent higher.

Seven nonresidential construction subsectors had decreases in spending for the month, including conservation and development, down 11.6 percent; communication, 4.9 percent lower; water supply, down 4.3 percent; religious, 4.3 percent lower; and amusement and recreation-related construction, down 3.5 percent. Twelve subsectors are down from November 2010, including conservation and development construction, down 23.3 percent; religious construction, 23.1 percent lower; lodging construction, down 19 percent; water supply construction, 10.6 percent lower; and communication-related construction, down 9.4 percent.

Residential construction spending increased 1.8 percent in November, and rose 2 percent during the last twelve months. Overall, total construction spending – which includes both nonresidential and residential – rose 1.2 percent in for the month, and is 0.5 percent higher than November 2010.

Analysis


“November’s nonresidential construction performance was solid,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The increase in spending was broad-based and encompassed both private and public construction.

“While privately purchased nonresidential construction has been rebounding for quite some time and is up 4.5 percent year over year, publicly-purchased construction has been in general decline,” Basu said. “That changed in November, with public construction up nearly 2 percent, led by increased purchases in the power, health care, office and sewage and waste disposal categories.

“It should be noted that these data are seasonally adjusted, which means they attempt to account for seasonal weather conditions,” said Basu. Because November was unusually mild in much of the nation, the improvement in nonresidential construction spending may at least be partially attributable to weather rather than economic factors.

In addition, December was also unusually temperate, with the implication being that next month’s report may also be positive,” Basu said.

“Despite the recent momentum in nonresidential construction spending, there remain plenty of reasons for concern,” said Basu. “Lending conditions continue to be disciplined and state and local government budgets remain stressed – not a good combination to push the nonresidential construction industry out of the doldrums.”