The U.S. economy’s performance slowed in the first quarter of 2017, but nonresidential fixed investment expanded at an impressive 9.4 percent seasonally adjusted annual rate, according to analysis of U.S. Bureau of Economic Analysis data recently released by Associated Builders and Contractors (ABC).
Real gross domestic product (GDP) expanded 0.7 percent on a seasonally adjusted annualized rate during the first three months of the year. Despite the subdued growth, GDP has now expanded in every quarter over the past three years. Fourth quarter 2016 growth was revised upward from a 1.9 percent annual rate of expansion to a 2.1 percent annual rate.
This represents the best quarter for nonresidential fixed investment, a category closely aligned with construction and other forms of business investment, since the end of 2013 and ends more than a year of tepid nonresidential fixed investment growth. Investment in structures, a subcomponent of nonresidential fixed investment, expanded 22.1 percent for the quarter after contracting by 1.9 percent in the fourth quarter of 2016. The other two subcomponents of nonresidential fixed investment—equipment and intellectual property products—expanded at a 9.1 percent rate and a 2.0 percent rate, respectively.
“It was expected that first quarter GDP would indicate that the U.S. economy remained unable to generate a high rate of growth,” said ABC Chief Economist Anirban Basu in a release. “Many economic actors appear to have adopted a cautious attitude in an environment characterized by a considerable amount of policy uncertainty. The decline in defense expenditures is likely to be a surprise to many given recent discussions about supposed vast increases in defense outlays.
“The investment in nonresidential structures during the first three months of the year is particularly remarkable in an environment otherwise characterized as generating little economic growth,” said Basu. “Rather than adopt a wait-and-see attitude, developers appear to have acted with conviction, taking advantage of growing confidence among investors and other market participants to forge ahead with planned projects. While the new presidential administration has yet to implement even a small fraction of its pro-business agenda, the development community continues to express confidence in the administration’s ability to create the conditions necessary for a much more vibrant U.S. economy.
“The expectation is that the balance of the year will be associated with much more rapid growth,” said Basu. “Consumer spending should pick up after a weak first quarter, given accelerating wage increases and elevated levels of job security. Business spending is also likely to expand briskly, particularly if the Trump administration is able to make meaningful progress on the corporate and personal income tax front.”
Related Stories
Market Data | Aug 21, 2019
Architecture Billings Index continues its streak of soft readings
Decline in new design contracts suggests volatility in design activity to persist.
Market Data | Aug 19, 2019
Multifamily market sustains positive cycle
Year-over-year growth tops 3% for 13th month. Will the economy stifle momentum?
Market Data | Aug 16, 2019
Students say unclean restrooms impact their perception of the school
The findings are part of Bradley Corporation’s Healthy Hand Washing Survey.
Market Data | Aug 12, 2019
Mid-year economic outlook for nonresidential construction: Expansion continues, but vulnerabilities pile up
Emerging weakness in business investment has been hinting at softening outlays.
Market Data | Aug 7, 2019
National office vacancy holds steady at 9.7% in slowing but disciplined market
Average asking rental rate posts 4.2% annual growth.
Market Data | Aug 1, 2019
Nonresidential construction spending slows in June, remains elevated
Among the 16 nonresidential construction spending categories tracked by the Census Bureau, seven experienced increases in monthly spending.
Market Data | Jul 31, 2019
For the second quarter of 2019, the U.S. hotel construction pipeline continued its year-over-year growth spurt
The growth spurt continued even as business investment declined for the first time since 2016.
Market Data | Jul 23, 2019
Despite signals of impending declines, continued growth in nonresidential construction is expected through 2020
AIA’s latest Consensus Construction Forecast predicts growth.
Market Data | Jul 20, 2019
Construction costs continued to rise in second quarter
Labor availability is a big factor in that inflation, according to Rider Levett Bucknall report.
Market Data | Jul 18, 2019
Construction contractors remain confident as summer begins
Contractors were slightly less upbeat regarding profit margins and staffing levels compared to April.