Nonresidential fixed investments fall in latest Construction Economic Update

The latest Construction Economic Update from the Associated Builders and Contractors (ABC) reported a 3.4% decline in nonresidential fixed investment during the first quarter of 2015. According to a recent gross domestic product report by the Bureau of Economic Analysis, the GDP rose by 0.2% during the same time.

This is the first time that nonresidential fixed investment declined since the first quarter of 2011, ABC reported.

Nonresidential fixed investment had been rising by more than 4% on an annualized basis during five of the previous six quarters.

Despite extreme weather across the country, nonresidential fixed investment expanded while energy prices were higher, causing the energy exploration, development, and distribution sectors to grow.

“Lower energy prices had an intense impact during the first quarter of 2015 and consumer spending was not enough to meaningfully offset the plummeting nonresidential fixed investment,” said ABC Chief Economic Anirban Basu. “Investment in equipment inched up just 0.1% and, while investment in intellectual property products expanded 7.8%, the third component, investment in structures, fell 23.1% during this year’s first quarter.”

Basu added that contractors and others in the building industry should remain positive in the continued expansion of the economy. Consumer spending is expected to pick up as the year goes on, which will help things return to normal levels during the second and third quarters of the year.

The following is first quarter performance of key segments:

• Personal consumption expenditures added 1.31% to GDP after contributing 2.98% in the fourth quarter.
• Spending on goods grew only 0.2% after a 4.8% increase in the fourth quarter.
• Real final sales of domestically products output – minus changes in private inventories – decreased 0.5% for the first quarter, after a 2.3% increase in the fourth quarter.
• Federal government spending expanded 0.3% in the first quarter following a 7.3% decrease in the prior quarter.
• Nondefense spending expanded 1.9% after increasing 1.5% in the fourth quarter of 2014.
• State and local government spending fell 1.5% during the first three months of the year after rising by 1.6% during the fourth quarter.