Fall trends in Construction’s Spending & 2015’s Outlook

A recent press release from The Associated General Contractors of America, reported that construction spending fell for the second consecutive month in September. According to Ken Simonson, the AGC of America’s chief economist, “construction gains remain fragmentary and volatile, even though industry employment has been picking up in more states.”

Here are some of September’s nonresidential spending statistics:

• Construction spending in September 2014 equaled $951 billion. Despite a 2.9% increase from September 2013, this numbers is down .4% from August.
  
• Private, nonresidential spending saw a .6% decrease for September, which was a 6.3% increase from September 2013.
  
• Public construction spending also decreased 1.3% from August 2014, but saw a 1.7% increase compared to September 2013.
  
• Power construction spending – the largest private nonresidential category – fell 3.1% in September, despite its 2.3% increase from September 2013.
  
• Compared to August, manufacturing construction spending decreased 1.1%, but saw a 17% increase from September 2013.
  
• As the commercial building sector continues at a steady increase, office buildings are expected to continue to increase 19% during 2015 to $32.3 billion.

According to association officials, the continual decline in construction spending is making it more difficult for the industry to recover from the downturn, while simultaneously struggling to accommodate the growing labor shortages that have resulted from demographic and economic shifts. While I don’t necessarily agree with the idea that it’ll be difficult to recover, one solution, presented by AGC of America officials, is to have Washington officials pass long-term infrastructure procedures that make it easier to prepare future construction workers.

Stephen E. Sandherr, CEO of The Associated General Contractors of America, commented that “with labor markets tight yet demand flattening, many contractors are having a hard time deciphering current economic conditions.” This, in combination with the less than exciting growth of the US economy, is creating new obstacles, “without eliminating many of the problems that came with the downturn for most contractors.”

2015’s construction starts outlook

Despite the numbers and the views presented in The Associated General Contractors of America press release, there’s information that shows the outlook for 2015 is better than that of 2014.

If you’re stuck on the dip in construction spending in August and September, one explanation is with the extraordinary amount of projects launched this summer, the numbers had to decline at some point. And as you saw, year-over-year numbers continue to promising – which are more telling than month-to-month numbers.

Looking forward to 2015, Dodge forecasts that construction starts next year could reach $612 billion – a 9% increase from 2014. According to Robert Murray, vice president of economic affairs at Dodge Data & Analytics, “You’re beginning to get more of a contribution from a number of sectors.” This, he said, makes the growth “more diversified and less vulnerable.”

Here are some numbers to keep an eye on as 2015 approaches, courtesy of Engineering News Record:

• The retail sector is only expected to increase 2% increase to $17.1 billion. However, due to the improved housing market and a growing economy, there could be an 11% upsurge in store construction starts by in 2015 to $18.9 billion.
• One sector that will likely see a drop in construction starts is manufacturing.  2015’s number show a 16% drop to $24.4 billion.
• Public works construction starts are projected to increase 5% in 2015 to $118.8 billion.

Only time will tell, but we will continue to keep an eye on industry reports and trends, as predictions and forecasts are released for 2015.

What do you think? Will construction starts and spending continue its year-over-year increase? Share your thoughts in the comments below.