February 18, 2015

Construction Spending Carries Momentum into 2015, Reports Marcum Commercial Construction Index

Construction Spending Carries Momentum into 2015, Reports Marcum Commercial Construction Index

New York City, NY – Total nonresidential construction spending was 6.6 percent higher in 2014 than in 2013 on a nonseasonally adjusted basis, with all signs pointing toward continued construction spending growth in 2015. This is the good news reported by the Marcum Commercial Construction Index for the fourth quarter of 2014, released today by accounting firm Marcum LLP.

“Last year arguably represented the best year for the U.S. economy since the Great Recession ended,” wrote Marcum Chief Construction Economist Anirban Basu, who authored the report. “While many will view the fourth quarter figure as disappointing, it’s important to consider the context of the data. Perhaps most important is the fact that the impact of diminished federal spending is significantly larger than many had anticipated. The federal spending subtracted more than half a percentage point from the fourth quarter’s headline number, which means that the non-federal portion of the economy expanded faster than 3 percent.”

Seven of 16 nonresidential construction subsectors posted spending increases in December on a monthly basis, led by communication construction and highway and street-related construction, both up by 2.5 percent. Year-over-year, conservation and development-related construction spending showed the biggest gain, with growth of 24 percent for the 12-month period.

Of the nine subsectors that experienced monthly declines for December, the most significant were in religious spending, which fell 4.1 percent, and public safety-related construction, which fell 4 percent. Commercial construction spending lost 1.7 percent in December, but was up 10.7 percent on a year-over-year basis.

“Q42014, while slightly less dynamic than the quarters proceeding it, bookended the best 270 consecutive days that the American commercial construction contractor has seen since the great recession of ’08,” said Joseph Natarelli, National Leader of Marcum’s Construction Industry Practice group and Partner-in-Charge of the Firm’s New Haven office. “Unlike its predecessors, the fourth quarter of 2014 didn’t benefit from the lingering (though tapering) effect of the federal stimulus package which, previously and undeniably, helped all quarters before it. If I had to mark a time when our industry was pushed from its nest and told to fly, this was it. And… if we didn’t exactly soar, we certainly stayed aloft. The data we’re reporting on in this installation of the Marcum Commercial Construction Index is, in my humble opinion, a validation of the economic viability of our industry, independent of government intervention; a (nuanced) vote of confidence going into 2015 and a sign of good things to come.”

2015 should be a year of rising construction spending, wages and profit margins, Mr. Basu predicts. While continued erratic federal spending is likely to impact public construction spending and a stronger U.S. dollar will challenge U.S. companies to maintain domestic market share, the U.S. economy overall seems poised to grow at a rate of around 3 percent, he reports.

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Construction