Spending declines to begin soon for nonresidential building and heavy project markets

August 11, 2010

December 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.

  Monthly Figures*
(latest actual values)
Annual Figures
  Actual Forecast
  Nov-08 Dec-08   2007 2008 2009 2010
Lodging (% change is period versus
same period, previous year)
38.014 37.939   28.602 37.091 37.425 38.888
13.0% 18.1%   59.0% 29.7% 0.9% 3.9%
Office 73.627 73.106   64.702 72.628 71.500 72.450
  5.5% 7.1%   19.4% 12.2% -1.6% 1.3%
Commercial (mainly retail) 79.646 78.451   88.478 85.944 76.125 80.600
  -14.1% -11.5%   15.4% -2.9% -11.4% 5.9%
Health Care 48.186 48.561   42.904 46.362 46.600 49.675
  6.9% 9.1%   11.5% 8.1% 0.5% 6.6%
Education 105.596 104.814   96.085 104.020 102.450 105.450
  3.5% 4.2%   12.9% 8.3% -1.5% 2.9%
Religious 7.496 7.568   7.454 7.111 6.687 6.450
  8.0% 5.6%   -3.8% -4.6% -6.0% -3.6%
Public Safety 14.377 14.478   9.869 12.574 12.863 12.038
  29.5% 31.8%   26.5% 27.4% 2.3% -6.4%
Amusement/Recreation 22.439 21.831   21.610 22.943 21.163 21.850
  -0.7% -5.6%   13.8% 6.2% -7.8% 3.2%
Manufacturing 73.536 75.734   39.401 57.421 70.598 63.975
  35.0% 43.0%   15.7% 45.7% 22.9% -9.4%
Total 462.917 462.482   402.242 452.694 445.410 451.375
  7.3% 8.3%   17.6% 12.5% -1.6% 1.3%
         
 

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