Real gross domestic product (GDP) expanded 1.2% (seasonally adjusted annual rate) during 2016’s second quarter according to according to an analysis of Bureau of Economic Analysis data released by Associated Builders and Contractors (ABC).
This modest figure follows a 0.8% annualized rate of output growth registered during the year’s first quarter.
Nonresidential fixed investment, a category closely tied to construction and other forms of business investment, fell for a third consecutive quarter, slipping 2.2% from the first quarter, with investment in structures declining 7.9%. Residential investment fell for the first time since the first quarter of 2014. Nonresidential investment in equipment fell 3.5% for the quarter, while nonresidential fixed investment in intellectual property expanded 3.5% and has now expanded for 12 consecutive quarters.
“Construction industry stakeholders should not have been anticipating a solid GDP report given previous weak construction spending and employment numbers that were recently released and they did not get one,” said Anirban Basu, ABC’s chief economist. “Today’s report suggests that construction activity has stalled a bit more than thought, largely due to slowing residential investment growth and low levels of public sector investment. With apartment rents no longer rising in a number of markets, the nation’s apartment building boom has taken a bit of a pause.
“Only those who sell directly to consumers and certain technology firms are likely to glean some sense of satisfaction from today’s release,” said Basu. “The balance of the economy continues to disappoint, though the lack of inventory building during the second quarter may help position the economy for a bounce-back during the third. It will be interesting to see if ABC’s Construction Backlog Indicator begins to show that average nonresidential construction firm backlog is now in decline, though many contractors continue to indicate that they remain busy due to previously secured work.
“It should be noted that the 7.9% decline in spending on structures during the second quarter transpired despite some very positive economic circumstances,” said Basu. “For instance, interest rates remain shockingly low, foreign investment continues to pour into U.S. commercial real estate, and there are positive wealth effects being generated by both housing and equity markets. However, it appears that even these conditions are no longer enough to support growing demand for construction spending. One could theorize that uncertainty originating from the current presidential election cycle is partially responsible.”
The following highlights emerged from today’s second quarter GDP release. All growth figures are seasonally adjusted annual rates:
- Personal consumption expenditures expanded 4.2% on an annualized basis during the second quarter of 2016 after growing 1.6% during the first quarter of 2016.
- Spending on goods rose 6.8% during the first quarter after expanding by 1.2% during the previous quarter.
- Real final sales of domestically produced output increased 2.4% in the second quarter after increasing 1.2% in the first.
- Federal government spending inched down by 0.2% in the year’s second quarter after contracting 1.5% in the first quarter of 2016.
- Nondefense government spending increased by 3.9% for the quarter following an increase of 0.9% in the first.
- National defense spending fell by 3% during the second quarter after registering a 3.2% decline in the previous quarter.
- State and local government spending fell by 1.3% in the second quarter after expanding 3.5% in the first quarter.
Related Stories
Market Data | Nov 29, 2016
It’s not just traditional infrastructure that requires investment
A national survey finds strong support for essential community buildings.
Industry Research | Nov 28, 2016
Building America: The Merit Shop Scorecard
ABC releases state rankings on policies affecting construction industry.
Multifamily Housing | Nov 28, 2016
Axiometrics predicts apartment deliveries will peak by mid 2017
New York is projected to lead the nation next year, thanks to construction delays in 2016
Market Data | Nov 22, 2016
Construction activity will slow next year: JLL
Risk, labor, and technology are impacting what gets built.
Market Data | Nov 17, 2016
Architecture Billings Index rebounds after two down months
Decline in new design contracts suggests volatility in design activity to persist.
Market Data | Nov 11, 2016
Brand marketing: Why the B2B world needs to embrace consumers
The relevance of brand recognition has always been debatable in the B2B universe. With notable exceptions like BASF, few manufacturers or industry groups see value in generating top-of-mind awareness for their products and services with consumers.
Industry Research | Nov 8, 2016
Austin, Texas wins ‘Top City’ in the Emerging Trends in Real Estate outlook
Austin was followed on the list by Dallas/Fort Worth, Texas and Portland, Ore.
Market Data | Nov 2, 2016
Nonresidential construction spending down in September, but August data upwardly revised
The government revised the August nonresidential construction spending estimate from $686.6 billion to $696.6 billion.
Market Data | Oct 31, 2016
Nonresidential fixed investment expands again during solid third quarter
The acceleration in real GDP growth was driven by a combination of factors, including an upturn in exports, a smaller decrease in state and local government spending and an upturn in federal government spending, says ABC Chief Economist Anirban Basu.
Market Data | Oct 28, 2016
U.S. construction solid and stable in Q3 of 2016; Presidential election seen as influence on industry for 2017
Rider Levett Bucknall’s Third Quarter 2016 USA Construction Cost Report puts the complete spectrum of construction sectors and markets in perspective as it assesses the current state of the industry.