Real gross domestic product (GDP) expanded 2.9 percent on a seasonally adjusted annualized rate during the third quarter of 2016, according to an analysis of Bureau of Economic Analysis data released today by Associated Builders and Contractors (ABC). This follows a 1.4 percent increase during the second quarter and represents the tenth consecutive quarter of economic expansion.
Nonresidential fixed investment, a category closely aligned with construction and other forms of business investment, expanded at a 1.2 percent annualized rate during the third quarter after growing 1 percent during the second. Investment in structures led the way, increasing by 5.4 percent in the third quarter after falling 2.1 percent during the second. Investment in equipment fell 2.7 percent for the quarter, while investment in intellectual property products expanded 4 percent. Residential investment continued to fall, declining 6.2 percent in the third quarter after falling 7.7 percent during the second.
The following highlights emerged from today’s third quarter GDP release. All growth figures are presented as seasonally adjusted annualized rates:
- Personal consumption expenditures expanded 2.1 percent on an annualized basis during the third quarter of 2016 after growing 4.3 percent during the second quarter of 2016.
- Spending on goods rose 2.2 percent during the third quarter after expanding by 7.1 percent during the previous quarter.
- Real final sales of domestically produced output increased 2.3 percent in the third quarter after increasing 2.6 percent in the second.
- Federal government spending expanded 2.5 percent in the year’s third quarter after contracting during each of the prior two quarters.
- Nondefense government spending increased 3 percent during the quarter following an increase of 3.8 percent during the second.
- National defense spending grew by 2.1 percent during the third quarter after registering a 3.2 percent decline in the previous quarter.
- State and local government spending fell by 0.7 percent in the third quarter after falling 2.5 percent in the second 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. One of the biggest impacts came from greater private inventory investment, likely in response to expectations for reasonably strong consumer spending. Growth in personal consumption expenditures was responsible for almost half of third quarter GDP growth. However, this build in inventories is likely to subtract from economic growth in future quarters, though not massively,” says ABC Chief Economist Anirban Basu.
“Third quarter growth was solid, but future quarters may not be as good,” Basu says. “The economy will have to deal with a number of headwinds going forward, including a stronger dollar, building inflationary pressures and higher interest rates. Consumer spending growth will continue to lead the recovery. While this will help support construction spending in certain categories, including distribution centers, nonresidential investment in structures is likely to expand only slowly in early 2017.”
Related Stories
Market Data | Dec 20, 2017
Architecture billings upturn shows broad strength
The American Institute of Architects (AIA) reported the November ABI score was 55.0, up from a score of 51.7 in the previous month.
Market Data | Dec 14, 2017
ABC chief economist predicts stable 2018 construction economy
There are risks to the 2018 outlook as a number of potential cost increases could come into play.
Market Data | Dec 13, 2017
Top world regions and markets in the global hotel construction pipeline
The top world region by project count is North America.
Market Data | Dec 11, 2017
Global hotel construction pipeline is growing
The Total Pipeline stands at 12,427 Projects/2,084,940 Rooms.
Market Data | Dec 11, 2017
Construction backlog surges, sets record in third quarter
CBI is a leading economic indicator that reflects the amount of construction work under contract, but not yet completed.
Market Data | Dec 7, 2017
Buoyed by healthy economy, ABC Index finds contractors upbeat
Despite rising construction labor and materials costs, 55% of contractors expect their profit margins to expand in the first half of 2018.
Market Data | Dec 5, 2017
Top health systems engaged in $21 billion of U.S. construction projects
Largest active projects are by Sutter Health, New York Presbyterian, and Scripps Health.
Industry Research | Nov 28, 2017
2018 outlook: Economists point to slowdown, AEC professionals say ‘no way’
Multifamily housing and senior living developments head the list of the hottest sectors heading into 2018, according a survey of 356 AEC professionals.
Market Data | Nov 27, 2017
Construction's contribution to U.S. economy highest in seven years
Thirty-seven states benefited from the rise in construction activity in their state, while 13 states experienced a reduction in activity.
Market Data | Nov 15, 2017
Architecture Billings bounce back
Business conditions remain uneven across regions.