ABC Says Clues Point Away from Double-Dip

A Construction Economic Update from the Associated Builders and Contractors (ABC) says some recently released economic data provides help in “putting fears of a looming recession at rest for now.”

According to the ABC update, “non-residential fixed investment jumped 16.3 percent in the third quarter of 2011, following a revised 9.2 percent increase in the previous quarter of this year.” ABC says those figures came from the Oct. 27 Gross Domestic Report (GDP) report prepared by the Department of Commerce.

Non-residential fixed investment in structures specifically also increased for the second straight quarter this year, up 13.3 percent in the third quarter following a 22.6 percent increase in the second quarter of 2011.

Also in the construction sector, residential fixed investment grew 2.4 percent in the third quarter after a 4.2 percent loss in the second quarter.

“Today’s third quarter GDP report puts any talk of an imminent recession to rest for now,” says ABC Chief Economist Anirban Basu. “Indeed, economic data released over the past month have been surprisingly good,” he adds.

“Today’s report shows that a growing share of American corporations are willing to spend money to spur top-line and bottom-line expansion,” Basu continues. “However, this does not signify that the non-residential construction industry is set to boom. Public sector support for construction services is likely to be flat at best, and job growth remains halted and lending disciplined.”

While cautioning against over-exuberance, Basu sounds a guardedly optimistic tone. “The overall economic outlook for the non-residential construction industry has improved materially over the past several weeks. Eventually, the investment in equipment software and structures will trend late into expanded hiring. Capital and labor go together, and what the United States is now experiencing is acceleration in capital formation,” Basu says.

“That, in turn, will help trigger more demand for construction services, whether in the form of office buildings, apartments or shopping centers,” Basu remarks. “In short, the improved outlook for the broader economy in 2012 signals more recovery for construction activities in 2013 than were contemplated just a few weeks earlier.”

More news and analysis from ABC can be found at www.abc.org/.