“Construction is impacted more by weather than just about any economic segment and the impact of February’s brutal weather is evident in the government’s spending figure.”—ABC Chief Economist Anirban Basu
Blame it on the weather – that is what many economists have been doing over the past two months as economic data continue to disappoint. Retail sales, durable goods orders and other categories have not been as strong as anticipated.
Nonresidential construction has often proved an exception, with the industry’s momentum gaining steam recently. However, in February, nonresidential construction spending remained virtually unchanged inching down 0.1 percent on a monthly basis, according to the April 1 release from the U.S. Census Bureau. The February 2015 spending figure is 4.6 percent higher than February 2014, as spending for the month totaled $611.5 billion on a seasonally adjusted, annualized basis. The estimate for January spending was revised downward, from $614.1 billion to $611.9 billion, while the government revised December’s spending estimate upward from $627 billion to $629.3 billion.
“Construction is impacted more by weather than just about any economic segment and the impact of February’s brutal weather is evident in the government’s spending figure,” said Associated Builders and Contractors Chief Economist Anirban Basu. “ABC continues to forecast robust nonresidential construction spending recovery in 2015 despite the most recent monthly data, with the obvious exceptions of industry segments most directly and negatively impacted by declines in energy prices.
“The broader U.S. economy has not gotten off to as good a start in 2015 as many had expected with consumer spending growth frustrated by thriftier than anticipated shoppers,” said Basu. “With winter behind us and temperatures warming, the expectation is that economic growth will roar back during the second quarter, which is precisely what happened last year. To the extent that this proves to be true, nonresidential construction’s recovery can be expected to persist.”
Seven of 16 nonresidential construction subsectors posted increases in spending in February on a monthly basis.
- Manufacturing-related spending expanded 6.8 percent in February and is up 37.9 percent on a year-over-year basis.
- Conservation and development-related construction spending expanded 11 percent for the month and is up 19.8 percent on a yearly basis.
- Office-related construction spending expanded 2.4 percent in February and is up 19 percent from the same time one year ago.
- Amusement and recreation-related construction spending gained 2 percent on a monthly basis and is up 22.5 percent from the same time last year.
- Education-related construction spending grew 0.3 percent for the month, but is down 0.6 percent on a year-over-year basis.
- Construction spending in the transportation category grew 0.6 percent on a monthly basis and has expanded 9.3 percent on an annual basis.
- Lodging-related construction spending was up 5 percent on a monthly basis and 10.4 percent on a year-over-year basis.
Spending in nine nonresidential construction subsectors failed to rise in February.
- Health care-related construction spending fell 0.9 percent for the month and is down 4.5 percent for the year.
- Spending in the water supply category dropped 7.8 percent from January, but is still 7.4 percent higher than at the same time last year.
- Public safety-related construction spending lost 2.2 percent on a monthly basis and is down 9.6 percent on a year-over-year basis.
- Commercial construction spending lost 1.9 percent in February, but is up 13.5 percent on a year-over-year basis.
- Religious spending fell 4.8 percent for the month and is down 10.3 percent from the same time last year.
- Sewage and waste disposal-related construction spending shed 1.4 percent for the month, but has grown 19.9 percent on a 12-month basis.
- Power-related construction spending fell 4.5 percent for the month and is 17.2 percent lower than at the same time one year ago.
- Lodging construction spending is down 4.4 percent on a monthly basis, but is up 18.2 percent on a year-over-year basis.
- Sewage and waste disposal-related construction spending shed 7.5 percent for the month, but has grown 16 percent on a 12-month basis.
- Power-related construction spending fell 1.1 percent for the month and is 13.2 percent lower than at the same time one year ago.
- Communication-related construction spending fell 6.1 percent for the month and is down 15.5 percent for the year.
- Highway and street-related construction spending was unchanged in February and is up 3.3 percent compared to the same time last year.
To view the previous spending report, click here.
Greg Price, Partner-in-Charge, Energy & Oilfield Services, Sikich LLP
Joe Kulek, Partner-in-Charge, Construction & Real Estate Services, Sikich LLP
The S&P/Case-Shiller Home Price Indices posted solid gains in January. The slide in year-over-year home price appreciation appears to have halted. Gains have been strongest in markets with large tech sectors.
More Moderation Expected
- The 20-city and 10-city composite indices both increased 0.9 percent in January and are up roughly 4.5 percent year over year. The national index posted a 0.6 percent rise on the month, but also increased 4.5 percent year over year.
- Most measures of home prices are stabilizing around 5 percent year-over-year growth after decelerating for some time. Tight inventories and rising development costs will support prices.
Technology Markets Approaching All-Time Highs
- Year-over-year gains have been broad based. Weakness has been mostly isolated to the Northeast and Midwest. Cleveland and Washington, D.C. both posted sub-two percent growth.
- Only two of the twenty housing markets in the report have surpassed their prerecession peak. Many of the markets with large technology sectors, however, are rapidly approaching pre-recession levels.