The U.S. economy expanded at an annualized rate of 1.9% in the third quarter of 2019 despite contracting levels of nonresidential investment, according to an Associated Builders and Contractors analysis of data released today by the U.S. Bureau of Economic Analysis. Nonresidential fixed investment declined at a 3% annual rate in the third quarter after declining at a 1% rate in the second quarter.
The annual rate for nonresidential fixed investment in structures, a component closely tied to construction, declined 15.3% in the third quarter. Investment in structures has now contracted in four of the previous five quarters, including an 11.1% decline in the second quarter of 2019.
“Today’s report reinforced a number of observations regarding the U.S. economy and the nation’s nonresidential construction sector,” said ABC Chief Economist Anirban Basu. “First, the economy is slowing. While consumer spending and government outlays remain elevated, gross private domestic investment continues to slip, this time by 1.5% on an annualized basis in the third quarter. While this is less than the 6.3% decline registered during the second quarter, the key takeaway is that the current economic expansion is narrowing, increasingly fueled by consumers and public agencies taking on additional debt.
“Second, certain segments of nonresidential construction continue to soften,” said Basu. “Recent data regarding nonresidential construction spending indicate weaker spending in categories such as office and lodging. This was reflected in today’s GDP report, which indicated that spending on structures contracted significantly during the third quarter. For the most part, nonresidential construction spending growth continues to be driven by public construction, including in categories such as water supply and public safety.
“The primary question now is whether the slowdown in economic activity will persist into 2020,” said Basu. “Many factors suggest it will, including a weakening global economy, a U.S. manufacturing sector that is arguably already in recession, vulnerability attributable to massive accumulations of public, corporate and household debt and the uncertain outcomes attached to ongoing trade negotiations. On the other hand, U.S. equity markets have continued to surge higher in the context of better-than-expected corporate earnings and ongoing accommodation by the Federal Reserve. Put it all together and the outlook for the U.S. economy has seldom been more uncertain, especially given next year’s elections.
Related Stories
Market Data | Aug 2, 2017
Nonresidential Construction Spending falls in June, driven by public sector
June’s weak construction spending report can be largely attributed to the public sector.
Market Data | Jul 31, 2017
U.S. economic growth accelerates in second quarter; Nonresidential fixed investment maintains momentum
Nonresidential fixed investment, a category of GDP embodying nonresidential construction activity, expanded at a 5.2% seasonally adjusted annual rate.
Multifamily Housing | Jul 27, 2017
Apartment market index: Business conditions soften, but still solid
Despite some softness at the high end of the apartment market, demand for apartments will continue to be substantial for years to come, according to the National Multifamily Housing Council.
Market Data | Jul 25, 2017
What's your employer value proposition?
Hiring and retaining talent is one of the top challenges faced by most professional services firms.
Market Data | Jul 25, 2017
Moderating economic growth triggers construction forecast downgrade for 2017 and 2018
Prospects for the construction industry have weakened with developments over the first half of the year.
Industry Research | Jul 6, 2017
The four types of strategic real estate amenities
From swimming pools to pirate ships, amenities (even crazy ones) aren’t just perks, but assets to enhance performance.
Market Data | Jun 29, 2017
Silicon Valley, Long Island among the priciest places for office fitouts
Coming out on top as the most expensive market to build out an office is Silicon Valley, Calif., with an out-of-pocket cost of $199.22.
Market Data | Jun 26, 2017
Construction disputes were slightly less contentious last year
But poorly written and administered contracts are still problems, says latest Arcadis report.
Industry Research | Jun 26, 2017
Time to earn an architecture license continues to drop
This trend is driven by candidates completing the experience and examination programs concurrently and more quickly.
Industry Research | Jun 22, 2017
ABC's Construction Backlog Indicator rebounds in 2017
The first quarter showed gains in all categories.