MDM provides a synopsis of construction spending trends each month, with a look at the segments of construction that gained and lost during the month.
Summary
Construction spending in March 2013 was down 1.7 percent from the month before and up 4.8 percent from March 2012. Here is the breakdown:
- Private residential construction spending was up 0.4 percent from February, and up 18.2 percent year-over-year
- Private nonresidential construction spending was down 1.5 percent from February and up 2.8 percent year-over-year
- Public construction spending was down 4.1 percent from February, and down 5.4 percent year-over-year
The March 2013 data was released May 1.
Analysis
“To a certain extent, today’s release reinforces the pre-existing trend,” said Associated Builders and Contractors Chief Economist Anirban Basu. “A number of segments associated with public financing have been in decline for quite some time and those declines persisted in March. Among the hardest-hit categories have been water supply, public safety, and sewage and waste disposal – segments that depend heavily on state and local government spending.”
“However, there is weakness creeping into many private segments as well,” Basu said. He said that the 1.5 percent decline in private nonresidential construction spending indicated that many developers and financiers may remain hesitant.
But leading construction indicators remain positive, he said, suggesting improved performance as the year continues.
Forecast
The overall economy appears set to decelerate during the second quarter, according to Basu, and if the economy continues to slow down as it did last year at this time, it’s unlikely construction markets will remain positive.
“Although questions remain regarding the ultimate impact of sequestration and still-fragile state and local government budgets, the consensus forecast calls for ongoing economic recovery in 2013,” Basu said.
According tothe Associated General Contractors of America chief economist Ken Simonson, the best-performing categories for the rest of the year are likely to be multifamily housing, power and energy, manufacturing, warehouses and private transportation, while most public segments will continue to weaken. “For the year as a whole, I expect both residential and private nonresidential construction spending to top 2012 totals by 10 to 15 percent, while public construction will slip 2 to 5 percent,” Simonson said.
Segment Trends
According to Census Bureau data, the following construction segments overall had the greatest gains or declines in spending in March 2013 from March 2012. It is not broken out by private vs. public sectors.
Winners: Largest Gains from March 2012
- Transportation: +19.1%
- Residential: +17.8%
- Lodging: +11.6%
- Power: +4.3%
- Manufacturing: +3.4%
Losers: Largest Losses or Smallest Gains from March 2012
- Sewage and waste disposal: -18.8%
- Public safety: -14.3%
- Amusement and recreation: -12.9%
- Conservation and development: -10.1%
- Educational: -6.8%
