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Marcum Commercial Construction Index Finds Nonresidential Construction Sector Flat in Fourth Quarter

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New York City, NY – Nonresidential construction spending in the final quarter of 2012 brought the year to a flat close for the industry, according to the second quarterly Marcum Commercial Construction Index, released today by Marcum LLP. December spending increased a marginal 1.2% to $570.4 billion annualized, compared to $563.5 billion in 2011. Nonresidential Fixed Investment in Structures, another key economic indicator, declined 1.1%, compared to robust growth of 11.5% a year earlier. Both measures were consistent with the slowing of the overall U.S. economy in the fourth quarter, when Gross Domestic Product was off 0.1% versus growth of 4.1% in the same period the prior year. The complete index can be viewed online at www.marcumllp.com/constructionindex.

“December was soft with various nonresidential components reporting mixed results. Of the 16 subsectors that comprise nonresidential construction in the U.S., six reported construction spending reductions and 10 reported increases in December on a seasonally-adjusted basis. However, at least some of the growth is attributable to Hurricane Sandy rebuilding and therefore is not necessarily indicative of accelerating industry momentum,” said Anirban Basu, Marcum’s Chief Construction Economist and chairman of Sage Policy Group, a leading economic advisor to the construction industry.

The negligible increase in nonresidential construction spending contrasts with robust gains in the housing market, which showed growth of 22.3% year-over-year, to $314.6 billion. Driven by disaster reconstruction in the fourth quarter, however, employment in nonresidential building outpaced the residential category, with growth of 2.0% versus a decline of 0.2%, respectively. Overall construction spending was up 7.8%.

“The economy continues to face headwinds. The initial half of 2013 will offer grinding progress at best. However, if the federal government is able to navigate key budget and tax issues, the latter half of the year could be much better. The performance of financial markets has helped to restore capital and a certain degree of confidence as reflected in the rising Architectural Billing Index readings,” Mr. Basu said.

“Even though bonding remains tight and profit margins haven’t risen to the levels we’d like to see, I’m cautiously optimistic that we will see growth in quarters to come. As projects begin to stack up and the workforce becomes more pressurized, profit margins will increase to a more appropriate level. Backlogs take time and they require a healthy economy in which to grow. That being said, our clients are starting to show backlogs that, while not yet robust, are back on a track towards good health,” said Marcum Construction Industry Group Leader Joseph Natarelli, Partner-in-Charge of the Firm’s New Haven Office.

Other Quarterly Highlights

  • Top performing subsectors in nonresidential construction spending:
    • Lodging – 16.1%
    • Transportation – 13.9%
    • Power – 11.2%
    • Commercial – 9.1%
  • Seasonally Adjusted Employment:
    • Heavy and civil engineering construction – 2..7%
    • Residential specialty trade contractors – 2.7%
    • Nonresidential specialty trade contractors – 0.8%

About Marcum LLP
Marcum LLP is one of the largest independent public accounting and advisory services firms in the nation, with offices in major business markets throughout the U.S., Grand Cayman and China. Headquartered in New York City, Marcum provides a full spectrum of traditional tax, accounting and assurance services; advisory, valuation and litigation support; and an extensive range of specialty and niche industry practices. The Firm serves both privately held and publicly traded companies, as well as high net worth individuals, private equity funds and hedge funds, with a focus on middle-market companies and closely held family businesses. Marcum is a member of the Marcum Group, an organization providing a comprehensive array of professional services.

 
Joseph Natarelli

Partner-in-Charge
New Haven, CT
Assurance
New Haven, CT
 
 
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