Real gross domestic product (GDP) expanded by 2.6% on a seasonally adjusted annualized basis during the year’s second quarter, according to Associated Builders and Contractors’ analysis of data released today by the Bureau of Economic Analysis. Nonresidential fixed investment, a category of GDP embodying nonresidential construction activity, expanded at a 5.2% seasonally adjusted annual rate. This follows a 7.2% expansion during the first quarter.
The expansion in nonresidential fixed investment indicates that growth in business outlays continues to support the ongoing economic recovery, now in its ninth year. The expansion of nonresidential fixed investment contributed more than sixth-tenths of a percentage point to GDP growth. This was due in large measure to an uptick in investment in construction equipment. The other two components of nonresidential fixed investment—investment in structures and intellectual property—also expanded, but at a slower pace.
“This was a good report from the perspective of the nation’s nonresidential construction firms, particularly those primarily engaged in private as opposed to public construction,” says ABC Chief Economist Anirban Basu in a release. “The uptick in investment in construction equipment is particularly noteworthy because it signals a general belief that construction activity will continue to recover in America. Backlog among many nonresidential construction firms is already healthy, and today’s report suggests that backlog is not set to decline in any meaningful way anytime soon.
“One might wonder why construction firms remain so busy in an economic environment still characterized by roughly 2 percent growth,” says Basu. “There are many factors at work, including the ongoing boom of the e-commerce economy, which has continued to trigger demand for massive fulfillment and distribution centers even as stores close in massive numbers at America’s malls. The influx of global investment to a number of segments, including hotel and office construction, also helps explain disproportionate growth in certain private categories. With global fixed-income yields remaining so low, investors from around the world, including from the United States, are likely to continue to seek out opportunities for higher rates of return in commercial real estate, which thus far has had the impact of increasing property values and triggering construction.
“For the broader economy to accelerate, policymakers in Washington, D.C., will need to begin to make progress on corporate tax relief and infrastructure,” says Basu.
Related Stories
Multifamily Housing | Mar 4, 2024
Single-family rentals continue to grow in BTR communities
Single-family rentals are continuing to grow in built-to-rent communities. Both rent and occupancy growth have been strong in recent months while remaining a financially viable option for renters.
MFPRO+ News | Mar 2, 2024
Job gains boost Yardi Matrix National Rent Forecast for 2024
Multifamily asking rents broke the five-month streak of sequential average declines in January, rising 0.07 percent, shows a new special report from Yardi Matrix.
K-12 Schools | Feb 29, 2024
Average age of U.S. school buildings is just under 50 years
The average age of a main instructional school building in the United States is 49 years, according to a survey by the National Center for Education Statistics (NCES). About 38% of schools were built before 1970. Roughly half of the schools surveyed have undergone a major building renovation or addition.
MFPRO+ Research | Feb 27, 2024
Most competitive rental markets of early 2024
The U.S. rental market in early 2024 is moderately competitive, with apartments taking an average of 41 days to find tenants, according to the latest RentCafe Market Competitivity Report.
Construction Costs | Feb 22, 2024
K-12 school construction costs for 2024
Data from Gordian breaks down the average cost per square foot for four different types of K-12 school buildings (elementary schools, junior high schools, high schools, and vocational schools) across 10 U.S. cities.
Student Housing | Feb 21, 2024
Student housing preleasing continues to grow at record pace
Student housing preleasing continues to be robust even as rent growth has decelerated, according to the latest Yardi Matrix National Student Housing Report.
Architects | Feb 21, 2024
Architecture Billings Index remains in 'declining billings' state in January 2024
Architecture firm billings remained soft entering into 2024, with an AIA/Deltek Architecture Billings Index (ABI) score of 46.2 in January. Any score below 50.0 indicates decreasing business conditions.
Multifamily Housing | Feb 14, 2024
Multifamily rent remains flat at $1,710 in January
The multifamily market was stable at the start of 2024, despite the pressure of a supply boom in some markets, according to the latest Yardi Matrix National Multifamily Report.
Student Housing | Feb 13, 2024
Student housing market expected to improve in 2024
The past year has brought tough times for student housing investment sales due to unfavorable debt markets. However, 2024 offers a brighter outlook if debt conditions improve as predicted.
Contractors | Feb 13, 2024
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of January 2024
Associated Builders and Contractors reported today that its Construction Backlog Indicator declined to 8.4 months in January, according to an ABC member survey conducted from Jan. 22 to Feb. 4. The reading is down 0.6 months from January 2023.