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 | Jun 21, 2017
Design billings maintain solid footing, strong momentum reflected in project inquiries/design contracts
Balanced growth results in billings gains in all sectors.
Market Data | Jun 16, 2017
Residential construction was strong, but not enough, in 2016
The Joint Center for Housing Studies’ latest report expects minorities and millennials to account for the lion’s share of household formations through 2035.
Industry Research | Jun 15, 2017
Commercial Construction Index indicates high revenue and employment expectations for 2017
USG Corporation (USG) and U.S. Chamber of Commerce release survey results gauging confidence among industry leaders.
Market Data | Jun 2, 2017
Nonresidential construction spending falls in 13 of 16 segments in April
Nonresidential construction spending fell 1.7% in April 2017, totaling $696.3 billion on a seasonally adjusted, annualized basis, according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors.
Industry Research | May 25, 2017
Project labor agreement mandates inflate cost of construction 13%
Ohio schools built under government-mandated project labor agreements (PLAs) cost 13.12 percent more than schools that were bid and constructed through fair and open competition.
Market Data | May 24, 2017
Design billings increasing entering height of construction season
All regions report positive business conditions.
Market Data | May 24, 2017
The top franchise companies in the construction pipeline
3 franchise companies comprise 65% of all rooms in the Total Pipeline.
Industry Research | May 24, 2017
These buildings paid the highest property taxes in 2016
Office buildings dominate the list, but a residential community climbed as high as number two on the list.
Market Data | May 16, 2017
Construction firms add 5,000 jobs in April
Unemployment down to 4.4%; Specialty trade jobs dip slightly.
Multifamily Housing | May 10, 2017
May 2017 National Apartment Report
Median one-bedroom rent rose to $1,012 in April, the highest it has been since January.