Nonresidential Construction Edges Up Slightly

By April 1, 2013Economy

The Census Bureau said that construction spending rose 1.2 percent in February, recovering somewhat from the 2.1 percent drop in January. The strongest component of this growth stemmed from the residential sector, with private, residential housing construction up 2.2 percent in February and 20.1 percent year-over-year. This continues a strong rebound in the housing sector, which we see in starts and permits data, as well.

Meanwhile, private, nonresidential construction edged higher by just 0.4 percent in February, only partially improving after the significant 5.9 percent drop in January. The longer-term trend for nonresidential construction, though, reflects steady gains since the beginning of 2011. Since January 2011, the value of private, nonresidential construction has grown from $226.8 billion to $309.6 billion, or an increase of 36.5 percent. (New housing construction in the private sector rose 27.6 percent over the same time period from $237.7 billion to $303.4 billion.)

Manufacturing activity improved slightly in March, up from $51.115 billion to $51.273 billion, or 0.3 percent. The higher value was due to increased construction in the food and beverage, chemical, and fabricated metal products sectors. However, this was counteracted by some declines in the plastics and rubber, nonmetallic mineral, computer and electronic products, and transportation equipment sectors. Similar to the overall nonresidential data, manufacturing construction has moved generally higher over the past two year, up from $29.525 billion in January 2011 or an increase of 73.7 percent. As the attached chart shows, however, this is still below the peak level of $65.022 billion in February 2009.

Beyond manufacturing, other nonresidential business segments with increased construction in February included the following: lodging (up 4.8 percent), health care (up 3.1 percent), educational (up 2.7 percent), and power (up 0.7 percent). Declining levels of construction were seen among communications (down 9.2 percent), transportation (down 2.4 percent), religious (down 1.2 percent), and amusement and recreation (down 1.1 percent) firms. Public construction activity increased 0.9 percent for the month, but it has fallen 1.5 percent year-over-year.

Chad Moutray is chief economist, National Association of Manufacturers.


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