Through the first five months of 2015, nonresidential construction spending is having its second best year since the Census Bureau began tracking the metric in 2002. According to the bureau’s July 1 release, nonresidential construction spending increased 1.1% on a month-over-month basis and 8.1% on a year-over-year basis. It totals $669.6 billion on a seasonally adjusted, annualized basis.
From January to May, nonresidential spending expanded by 7.1%; the only year in which the segment saw faster growth was 2007. Since then, growth over each year’s initial five months has averaged only 1.8%.
Perhaps the most notable aspect of May’s release was the extensive upward revisions to three of the previous four months’ data. January, February and April saw their nonresidential construction spending estimates revised upward by 2%, 1.4% and 2.4%, respectively. The Census Bureau also increased the estimate for May 2014 by 1.4%.
“Though there continues to be discontent regarding performance of the U.S. economy, the current situation should be viewed positively,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The U.S. economy has now entered the mid-cycle portion of its recovery, which often represents a period of sustained progress for the average nonresidential construction firm.
“As with prior months, the industry progress continues to be led by the private sector. Among private segments, manufacturing-related construction was at the frontline of construction spending growth in May,” Basu added.
“Moderate economic growth will allow interest rates to rise gradually, helping extend this mid-cycle,” said Basu. “Although it took several years to get to this point of the recovery, contractors will find themselves steadily becoming busier, with margins gradually expanding. The principal obstacle to progress will be skilled labor shortages, which eventually will translate into faster inflation, rising interest rates and the move into the final stage of the current economic expansion.,” he said.
Nine of 16 nonresidential construction sectors experienced spending increases in May.
• Manufacturing-related construction spending expanded 6.2% in May and is up by 69.5% for the year.
• Office-related construction spending expanded 1.6% in May and is up 24.6% compared to the same time a year ago.
• Lodging-related construction spending was up 3.2% on a monthly basis and 30.6% on a year-over-year basis.
• Lodging-related construction spending was up 5.5% on a monthly basis and 17.6% on a year-over-year basis.
• Spending in the water supply category expanded 0.9% from April, but is down 6.8% on an annual basis.
• Religious spending gained 1.4% for the month and is up 9.2% from the same time last year.