Investment in the commercial and industrial construction industry fell in the second quarter of 2009, dropping 8.9 percent, according to the July 31 gross domestic product (GDP) report from the U.S. Commerce Department. Despite the drop, the GDP numbers represent a solid improvement over the first quarter nonresidential construction decline of 39 percent, according to ABC Chief Economist Anirban Basu.
Overall, consumer spending fell by 1.2 percent, led by a 7.1 percent decline in consumption of durable goods. Government spending was up 5.6 percent contributing greatly to the softening in the decline of GDP growth.
“As predicted, the pace at which the U.S. economy is shrinking slowed significantly during the second quarter of 2009,” said Basu. “Certain nonresidential construction activities will help bring the economy out of recession over the next several months.
Private nonresidential construction fell in June by 0.5 percent according to an Aug. 3 report issued by the U.S. Commerce Department. Overall, total nonresidential construction spending is up 0.1 percent from May 2009 to $711.9 billion, but down 0.7 percent from June 2008.
Sectors reporting the largest year-over-year spending increases include manufacturing, up 45.4 percent; public safety, up 14.1 percent; and power construction, up 13.3 percent. In contrast, on a year-over-year basis, commercial construction is down 28.2 percent, lodging is down 25.9 percent and communication construction is down 22.5 percent.
“Nonresidential construction is now in a period of decline,” Basu said. “Many sectors of the nonresidential construction industry will continue to experience declining activity due to rising office vacancy rates, expanding retail vacancy rates, and falling occupancy rates at hotels.
“The exception will be those categories directly impacted by the stimulus package, particularly infrastructure,” Basu continued. “ABC’s Construction Backlog Indicator supports the notion that infrastructure-related construction is set to increase significantly in the months ahead. Those sectors only indirectly related to the American Recovery and Reinvestment Act of 2009 will likely experience ongoing weakness well into 2010 and perhaps beyond.”
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