May 21, 2015

Marcum Commercial Construction Index Forecasts Improving Second Half in 2015

Marcum Commercial Construction Index Forecasts Improving Second Half in 2015

New York City, NY – The Marcum Commercial Construction Index forecasts that, despite a disappointing first quarter, the U.S. economy will strengthen in the second quarter and throughout the remainder or 2015, producing a better year overall for the U.S. construction industry.

In March, nonresidential spending fell 0.1 percent on a monthly basis, though the pace of spending was 4.7 percent higher than at the same time one year ago. Spending for the month totaled $611.8 billion on a seasonally adjusted, annualized basis. The Census Bureau upwardly revised its estimates for construction spending in the first two months of the year, to $612.4 billion from $611.5 billion in February, and to $613.1 billion from $611.9 billion for January.

“While this year’s first quarter was disappointing, it was still better than last year’s. Despite somewhat suppressed orders for goods during the second quarter due to higher than anticipated inventory levels, the quarter is still likely to produce 3 percent growth or more on an annualized basis,” said Marcum Chief Construction Economist Anirban Basu, author of the report. “This still may end up being the best year of the current economic expansion thus far.”

Seven of 16 nonresidential construction subsectors posted spending increases in March on a monthly basis — Manufacturing (3.0 percent), Office (2.2 percent), Transportation (1 percent), Lodging (5.2 percent), Health Care (0.2 percent), Water Supply (4.0 percent) and Communications (12.3 percent).

Nine subsectors failed to gain in March, including Public safety (down 2.8 percent), Commercial (2.2 percent), Religious (5.1 percent), Sewage and Waste Disposal (0.2 percent), Power (4.5 percent), Highway and Street (2.4 percent), Conservation and Development (11.4 percent), Amusement and Recreation (3.0 percent) and Education (1.8 percent).

“The past six months tell a story of headwinds and tailwinds that have seriously challenged the construction industry, but the data and analysis point towards a very strong second half of the year for the industry as a whole,” said Joseph Natarelli, National Leader of Marcum’s Construction Industry Practice group and Partner-in-Charge of the Firm’s New Haven office. “I expect a continued warming all over for the construction industry, from Road and Heavy Highway to institutional and including residential. While the industry may suffer a set-back if the Fed raises interest rates, as widely predicted, continued investment and building in some major US cities and the return of skilled labor spell out a successful conclusion to our first year of real recovery.

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