Nonresidential Construction Spending Continues Growth With Stellar May

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abc.org – Through the first five months of 2015, nonresidential construction spending is having its second best year since the Census Bureau began tracking the metric in 2002. According to the July 1 release, nonresidential construction spending increased 1.1 percent on a month-over-month basis and 8.1 percent on a year-over-year basis, and totals $669.6 billion on a seasonally adjusted, annualized basis. From January to May, nonresidential spending expanded by 7.1 percent; the only year in which the segment saw faster growth was 2007. Since then, growth over each year’s initial five months has averaged only 1.8 percent.

Perhaps the most notable aspect of May’s release was the extensive upward revisions to three of the previous four months’ data. January, February and April saw their nonresidential construction spending estimates revised upward by 2 percent, 1.4 percent and 2.4 percent, respectively. The Census Bureau also increased the estimate for May 2014 by 1.4 percent.

Spending 7.1

“Though there continues to be discontent regarding performance of the U.S. economy, the current situation should be viewed positively,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The U.S. economy has now entered the mid-cycle portion of its recovery, which often represents a period of sustained progress for the average nonresidential construction firm. As with prior months, the industry progress continues to be led by the private sector. Among private segments, manufacturing-related construction was at the frontline of construction spending growth in May.

“Moderate economic growth will allow interest rates to rise gradually, helping extend this mid-cycle,” said Basu. “Although it took several years to get to this point of the recovery, contractors will find themselves steadily becoming busier, with margins gradually expanding. The principle obstacle to progress will be skilled labor shortages, which eventually will translate into faster inflation, rising interest rates and the move into the final stage of the current economic expansion.”

Nine of 16 nonresidential construction sectors experienced spending increases in May.

  • Manufacturing-related construction spending expanded 6.2 percent in May and is up by 69.5 percent for the year.
  • Office-related construction spending expanded 1.6 percent in May and is up 24.6 percent compared to the same time one year ago.
  • Lodging-related construction spending was up 3.2 percent on a monthly basis and 30.6 percent on a year-over-year basis.
  • Spending in the water supply category expanded 0.9 percent from April, but is down 6.8 percent on an annual basis.
  • Religious spending gained 1.4 percent for the month and is up 9.2 percent from the same time last year.
  • Highway and street-related construction spending expanded 2.2 percent in May and is up 2.1 percent compared to the same time last year.
  • Conservation and development-related construction spending grew 8.6 percent for the month and is up 27.3 percent on a yearly basis.
  • Amusement and recreation-related construction spending gained 5.8 percent on a monthly basis and is up 29.8 percent from the same time last year.
  • Communication-related construction spending gained 3.3 percent for the month and is up 15.7 percent for the year.

Spending in seven nonresidential construction subsectors fell in May.

  • Education-related construction spending fell 0.8 percent for the month, but is up 1.8 percent on a year-over-year basis.
  • Power-related construction spending remained flat for the month, but is 23.5 percent lower than the same time one year ago.
  • Sewage and waste disposal-related construction spending fell 2.2 percent for the month, but has grown 13.3 percent on a 12-month basis.
  • Public safety-related construction spending fell 7.9 percent on a monthly basis and is down 11.8 percent on a year-over-year basis.
  • Commercial construction spending fell 1.7 percent in March, but is up 11.4 percent on a year-over-year basis.
  • Health care-related construction spending fell 0.6 percent for the month, but is up 3.1 percent compared to the same time last year.
  • Construction spending in the transportation category fell 0.9 percent on a monthly basis, but has expanded 5.4 percent on an annual basis.

Source: ABC.org