Rebound of Construction Sector Continuing

ABC also sees modest improvement in 2013.

December 5, 2012
CDR Staff
Forecasts & Statistics

Terms like “solid improvement” and “modest gains” are being used by construction industry associations as they analyze industry activity in the fourth quarter of 2012.

In a news release summarizing October 2012 construction data, the Associated General Contractors of America (AGC), Arlington, Va., says, “All major segments of construction spending increased in October, bringing total spending to a 37-month high at an annualized rate of $872 billion.”

“Widespread gains in spending in October, along with hefty upward revisions to estimates for the previous two months, show that construction has finally come out of its long slump,” says Ken Simonson, the AGC’s chief economist. “Although all major spending categories are far below pre-recession highs, they are well above their recent low points.”

Simonson says total construction spending rose for the seventh consecutive month in October, up 1.4 percent from September’s upwardly revised total and 9.6 percent from the October 2011 mark.

Private residential spending reached the highest level since November 2008, increasing by 21 percent during the past 12 months. Private non-residential construction edged up 0.3 percent for the month and 11 percent compared with October 2011. Public construction rose 0.8 percent in October, but has slipped 1.0 percent year-over-year.

The Associated Builders and Contractors (ABC), also based in Arlington, Va., summarized the same U.S. Census Bureau October figures as “a modest gain in October”  and noted that “total non-residential construction spending–which includes both private and public projects–is up 5.1 percent compared to one year ago.”

The ABC also released its 2013 economic forecast for the U.S. commercial and industrial construction industry, saying “it shows the continuation of a modest recovery for non-residential construction next year.”

“Thanks to a handful of segments experiencing more rapid economic recovery, much of the construction expansion next year will be in categories heavily associated with private financing,” says ABC Chief Economist Anirban Basu. “Due largely to constrained capital budgets at state and local government levels, as well as ongoing turmoil in Washington, D.C., publicly funded construction spending is expected to be flat next year, and perhaps worse.”

“Consumer confidence also has progressed,” Basu says. “Accordingly, ABC predicts total commercial construction will expand roughly 10 percent next year. Other industries positioned to experience rising levels of investment include power, up 10 percent; lodging, up 8 percent; health care, up 5 percent; and manufacturing, up 5 percent.”