Home -> Law Blog Directory -> Bailout Blogs -> Calculated Risk

Bailout

: Calculated Risk

AIA Forecast: Nonresidential Construction Spending to fall 20% in 2010

By Anonymous

From Reuters: US nonresidential building seen down 20 pct in '10

Spending on U.S. nonresidential construction is likely to fall more than 20 percent this year before recovering slightly in 2011, according to a semiannual survey by an architects' trade group.
...
Construction spending on hotels will drop more than 43 percent this year, construction of office buildings will decline almost 30 percent, and retail and industrial categories will be down more than 20 percent, the [American Institute of Architects] said.

Nonresidential construction investment has been a drag on GDP for six consecutive quarters (through Q1 2010), and will remain a drag throughout 2010 and probably into 2011.

Here is a repeat of a graph shows the rolling 4 quarter contribution to GDP from residential investment, equipment and software, and nonresidential structures. This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

For the following graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. The usual pattern - both into and out of recessions is - red, green, blue.

Click on graph for larger image in new window.

Equipment and software investment has made a positive contribution to GDP for three straight quarters (it is coincident). Tech has done better than most other sectors.

Residential Investment (RI) made a small positive contribution to GDP in the second half of 2009, but was a drag in Q1 2010. It will be positive again in Q2 2010 (tax credit related), and be negative again later this year. The rolling four quarter change is moving up, but as expected there has been no strong boost to GDP from RI.

Nonresidential investment in structures continues to be a drag on the economy, and as usual the economy is recovering long before nonresidential investment in structures recovers.

Full post as published by Calculated Risk on July 14, 2010 (boomark / email).