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The third-quarter results of the Marcum Commercial Construction Index report a continuing trend of spending weakness in nonresidential construction, and warn of significant change in the coming year.
In September, a total of $690.5 billion was spent on nonresidential construction—a 0.7 percent decrease from 2015. Despite this general decrease and some drops in the category’s 16 subsectors, most areas saw improvement.
Most significantly:
- office-related spending increased by 23 percent to $70.7 billion;
- lodging increased by 20 percent to $28.8 billion;
- commercial construction increased by six percent to $71.7 billion;
- amusement and recreation increased by 3.5 percent to $21.4 billion;
- educational construction increased by 3.3 percent to $87.1 billion;
- sewage and waste disposal decreased by 18.8 percent;
- water supply decreased by 13.7 percent;
- communication decreased by 12.6 percent; and
- transportation decreased by 11.3 percent.
“Oddly enough, certain U.S. construction segments have been aided by a weak global economy,” wrote Anirban Basu, Marcum’s chief construction economist. “Given a lack of investment opportunities worldwide, a significant amount of foreign capital has flowed into the U.S. in search of a better combination of yield and safety. Some of this money has flowed into office, lodging, and commercial construction, helping to explain the strength of these segments. Meanwhile, public spending has continued to be incredibly weak.”
The rate of construction worker unemployment has also seen a significant decrease, declining to 5.7 percent (as compared to the 13.7 percent it rated in October 2011), while the national unemployment rate stands at 4.9 percent.
“Data from the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey indicate construction job openings stand at a 10-year high,” wrote Basu on the subject. “The Christian Science Monitor reported that demand for construction workers is so strong in Portland, Maine, that Southern Maine Community College has had to suspend its construction technology program because too many students were leaving the program to accept employment offers.”
However, a stimulus package expected from the incoming presidential administration may initiate a change in 2017. The Marcum Commercial Construction Index predicts this package will place pressure on wages and inflation, resulting in higher interest rates and ultimately causing a decline in construction spending.
