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
Market Data | Apr 14, 2020
6 must reads for the AEC industry today: April 14, 2020
A robot dog conducts site inspections and going to the library with little kids just got easier.
Market Data | Apr 13, 2020
6 must reads for the AEC industry today: April 13, 2020
How prefab can enable the AEC industry to quickly create new hospital beds and Abu Dhabi launches a design competition focused on reducing urban heat island effect.
Market Data | Apr 10, 2020
5 must reads for the AEC industry today: April 10, 2020
Designing for the next generation of student life and a mass timber Ramada Hotel rises in British Columbia.
Market Data | Apr 9, 2020
7 must reads for the AEC industry today: April 9, 2020
Urine could be the key to building in outer space and how to turn a high school into a patient care center in just over two weeks.
Market Data | Apr 8, 2020
6 must reads for the AEC industry today: April 8, 2020
Stantec discusses how hospitals can adapt buildings to address worst-case scenarios and FXCollaborative Architects tells us why cities will survive the pandemic.
Market Data | Apr 7, 2020
7 must reads for the AEC industry today: April 7, 2020
Leo A Daly's Hotel2Hospital prototype takes shape, while the number of delayed projects reaches 2,550 in the U.S. amid coronavirus pandemic.
Market Data | Apr 3, 2020
COVID-19 cuts nonresidential construction employment in March
The construction unemployment rate was 6.9% in March, up 1.7 percentage points from the same time one year ago.
Market Data | Apr 1, 2020
February’s construction spending decline indicates what’s to come
Private nonresidential spending declined 2% on a monthly basis and is down 0.7% compared to February 2019.
Market Data | Mar 26, 2020
Architects taking action to support COVID-19 response
New AIA task force will offer insights for adapting buildings into healthcare facilities.