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Construction Industry Outlook has Shifted

Issue 17   Third Quarter 2016
Another Period of Rapid Spending Growth May be Forthcoming

The job of an economic forecaster is treacherous. Expect the unexpected is a common phrase, but until something truly unexpected occurs, one has a tendency to be cocooned in a set of preconceived notions. For many months, there was the broadly shared view that significant change was not coming to Washington, D.C.. Well, that conventional wisdom has been shattered and, with it, the pre-existing housing industry forecast.

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Construction Data Decidedly Mixed

Issue 16   Second Quarter 2016
Rate of Industry Expansion Softened in Early '16

After several months of disappointing construction spending and employment data, July represented a most welcome bit of good news. Data from prior months had indicated significant softening in nonresidential construction spending growth and diminished hiring. The overall U.S. construction industry shed 27,000 positions during the threemonth period ending in June.

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Industry Activity is Stable to Start 2016

Issue 15   First Quarter 2016
Spending Fares Better than Employment

Nonresidential construction spending shrank 0.4 percent on a monthly basis in March, though March would have been associated with a nonresidential spending gain were it not for significant upward revisions to February's data. Nonresidential spending totaled $695.7 billion in March on a seasonally adjusted, annualized basis and is up 8.3 percent from March 2015. Much of that growth is associated with the spring and early summer of 2015. Spending growth has stagnated in more recent months.

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Nonresidential Construction Data Mixed at Year's End

Issue 14   Fourth Quarter 2015
Seasonal Factors Likely at Work

Nonresidential construction spending fell in December 2015, mimicking a trend that began in September. This is probably not major cause for concern. Many nonresidential construction firms continue to report hefty and expanding backlog. The recent passage of a federal highway bill implies growing business among road builders.

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Nonresidential Spending Emerges as One of Economy's Leading Engines

Issue 13   Third Quarter 2015
Pent-up Demand for Construction Services Impacting Marketplace

Nonresidential construction spending fell in September for the first time in eight months. This, however, is no cause for concern. Spending, which totaled $692.8 billion in September according to a November 2 release by the U.S. Census Bureau, exhibited its largest year-over-year increase since April 2008, five months before the prerecession nonresidential construction spending peak. The month-over-month dip is partly a function of depressed construction materials prices' cheaper inputs allow contractors to offer their services at somewhat lower prices, all things being equal. The point is that most contractors are busier than they were one year ago.

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2015 Economic Recovery Enters Mid-Cycle Phase

Issue 12   Second Quarter 2015
Expect Rising Wages, Higher Interest Rates and Solid Demand

The nonresidential construction recovery can now be considered a vigorous one, particularly relative to the balance of the economy. According to an August 3 release supplied by the U.S. Census Bureau, nonresidential construction spending was unchanged on a month-overmonth basis in June, totaling $686.9 billion on a seasonally adjusted, annualized rate. Despite the lack of month-over-month growth, nonresidential spending is 11.5 percent higher than it was at the same time one year ago and expanded 9.8 percent during the year's first six months, the fastest such growth since the Census Bureau began tracking construction spending in 2002.

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2015 Can Still be a Fine Year

Issue 11   First Quarter 2015
The Next Six Months Will Be Better

Coming into 2015, many economists were forecasting above 3 percent growth. In fact, some still are. Tailwinds such as a booming stock market, lower fuel prices, rapid job growth, and early evidence of sharper wage gains led forecasters to believe that 2015 was shaping up to be the best year for the economy since 2005, the last time the U.S. economy expanded more than 3 percent over the course of a calendar year (3.4%).

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Construction Spending Carries Momentum into 2015

Issue 10   Fourth Quarter 2014

Last year arguably represented the best year for the U.S. economy since the Great Recession ended. GDP expanded 2.4 percent for the year, and while that fell short of the 2.5 percent growth generated in 2010, that year was associated with a significant tailwind from the stimulus package passed by Congress one year earlier. There was no federal stimulus package last year, and the economy still managed to expand moderately. According to the Bureau of Economic Analysis, real gross domestic product (GDP) expanded 2.6 percent (seasonally adjusted annual rate) during the fourth quarter, following a 5.0 percent increase during the third. Investment in nonresidential structures increased by 2.6 percent on an annualized basis.

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Momentum Starts to Build in Third Quarter

Issue 9   Third Quarter 2014

Two consecutive quarters of meaningful growth has been a rarity for the U.S. economy since the recovery began in 2009. The dominant pattern has been one of good quarter, bad quarter, good quarter, bad quarter. The third quarter of 2014 marks an end to the inconsistency. The U.S. economy expanded at a 3.5 percent pace during the third quarter of 2014 on an annualized basis. This follows an expansion of 4.6 percent annualized in the second quarter. Despite concerns pertaining to the global economy, confidence is high regarding the U.S. outlook, and continued momentum seems likely.

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Nonresidential Construction Primed for Strong Second Half in 2014

Issue 8   Second Quarter 2014

The economy appears to be back on track after a brutal winter derailed recovery efforts in the first quarter. According to the preliminary estimate from the Bureau of Economic Analysis, the U.S. economy expanded at a 4.0 percent pace during the second quarter of 2014 on an annualized basis. Robust second quarter growth was primarily driven by higher consumer and business spending as well as by an uptick in inventory investment. However, the data appear far less inspiring when one considers the first half of the year, which only saw 1 percent growth on an annualized basis. That said, the rebound from the dismal first quarter was broad-based; Federal Government spending was the only segment that contracted during the second quarter.

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Might As Well Forecast the Weather

Issue 7   First Quarter 2014

Any momentum garnered during the final sixth months of 2013 was stymied by the brutal winter of 2013-14. According to the preliminary estimate from the Bureau of Economic Analysis, the U.S. economy expanded at a 0.1 percent pace during the year's initial quarter. That estimate is subject to revision and could conceivably be revised into negative territory. Thankfully, most economic indicators indicate that both consumer spending and total production have already rebounded from their sluggish first quarter pace. Unfortunately, indications of forward momentum in nonresidential construction spending have been scarcer.

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Private and Public Nonresidential Construction Recovery Remains Sporadic

Issue 6   Fourth Quarter 2013

The U.S. economy has now entered its sixth year of economic recovery. During the fourth quarter of 2013, the U.S. economy expanded again, this time at a 3.2 percent annualized rate. 2013 will not go down in history as a great year for the U.S. economy, and tax increases, sequestration, and a still sluggish global economy are all partially to blame for this result. That said, economic momentum developed over the course of the year and 2013's final six months were reasonably encouraging.

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Private and Public Nonresidential Construction Continues Sluggish Growth

Issue 5   Third Quarter 2013

The U.S. economy has now entered its fifth year of economic recovery. During the recently completed third quarter, the U.S. economy expanded again, this time at a 2.8 percent annualized rate - well ahead of expectations. This GDP release, however, represents the last piece of information regarding U.S. output and nonresidential fixed investment that is untouched by the federal government shutdown in October and the most recent debt ceiling debate. Of course, September economic activity could have been impacted by rising uncertainty as the October 1st budgetary deadline approached.

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Private and Public Nonresidential Construction Exhibits Ongoing Lack of Momentum

Issue 4   Second Quarter 2013

The U.S. economy has now entered its fifth year of economic recovery. Second quarter gross domestic product surprised to the upside, expanding 1.7 percent on an annualized basis despite many forecasts indicating that the second quarter estimate would come in at less than 1 percent. Despite a macroeconomic context associated with a booming stock market and sixteen consecutive quarters of economic expansion, nonresidential construction continues to manifest a decided lack of spending momentum.

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Nonresidential Construction Recovery Restrained by Public Funding

Issue 3   First Quarter 2013

The U.S. economy outperformed expectations during the first quarter, led by a combination of rising stock prices and household wealth, an improving housing market, steady auto sales and engaged consumers. Admittedly, expectations coming into the quarter were low given increased taxes and what turned out to be legitimate concerns regarding sequestration. According to preliminary estimates, the economy expanded 2.5 percent on an annualized basis during 2013's initial three months, much better than the 0.4 percent annualized growth posted during 2012's final quarter.

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Nonresidential Construction Sector Flat in Fourth Quarter

Issue 2   Fourth Quarter 2012

The combination of electoral uncertainty, fears of a fall off the fiscal cliff, a sharp decline in defense outlays and negative adjustments to inventory produced a shrinking U.S. economy during last year's final quarter. Real gross domestic product decreased 0.1 percent at a seasonally adjusted annual rate in the fourth quarter, ending a growth streak for the U.S. economy that spanned 13 quarters. Overall annual economic growth tallied 2.2 percent in 2012, following a 1.8 percent annual increase in 2011.

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Nonresidential Construction's Recovery Has Stalled

Issue 1   Third Quarter 2012

During the third quarter of 2012, the U.S. economy expanded for a 13th consecutive quarter. Unfortunately, nonresidential construction has not been among the economic segments experiencing meaningful recovery. While the broader economy expanded at a 2 percent annualized rate during the third quarter, due in part to ongoing consumer spending growth, nonresidential investment declined 4.4 percent on an annualized basis following a modest 0.3 percent gain during the second.

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