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