November 25, 2014

Momentum Starts to Build in Third Quarter, Reports Marcum Commercial Construction Index

Momentum Starts to Build in Third Quarter, Reports Marcum Commercial Construction Index

New York City, NY – The third quarter of 2014 marked the end of the regularly alternating economic pattern between positive and negative growth quarters, according to the Marcum Commercial Construction Index. The U.S. economy expanded at a 3.5 percent pace during the third quarter on an annualized basis, following an expansion of 4.6 percent annualized in the second quarter.

However, in September, nonresidential construction spending shrank one percent on a monthly basis following a 0.6 percent decrease in August and a 0.8 percent increase in July.

“This is hardly a cause for concern. While it is disappointing to see construction spending fall in consecutive months, industry-specific economic indicators continue to present positive signals,” said Anirban Basu, Marcum’s Chief Construction Economist.

In September, five of sixteen nonresidential construction subsectors posted increases in spending on a monthly basis. Of the remaining 11 subsectors that declined during the month, seven posted increases year-over-year. Manufacturing stands out, accounting for 32 percent of the total increase in nonresidential spending over the past 12 months.

Nonresidential construction spending continues to be hampered by public stagnation. Meanwhile, growth in the private sector has been both consistent and robust. Private nonresidential spending expanded by at least 6 percent in each of the past 9 months.

The U.S. construction industry added 12,000 jobs in October according to the Bureau of Labor Statistics’ preliminary estimate released on November 7, but nonresidential construction actually shed 1,900 positions on a month-to-month basis. Both nonresidential building construction and nonresidential specialty trade contractors lost jobs for the month, though both segments have still added jobs on a year-over-year basis. The national construction unemployment rate dropped from 7 percent to 6.4 percent on a non-seasonally adjusted basis in October, its lowest level since November 2007, the month before the recession began.

“The construction industry, as noted in this quarterly index and forecasted in our last, appears to be back on its feet and ready to build America,” said Joseph Natarelli, National Leader of Marcum’s Construction Industry Practice group and Partner-in-Charge of the Firm’s New Haven office. “Backlogs are filling and profit margins are viable, if not robust, just yet. As we move forward through the fourth quarter, I wonder how our luck will be this year. Are we prepared for a polar vortex, for punishing snow dumps (ala Buffalo, NY) and work stoppages? Have we learned from the past, will seasonal stoppages in intemperate areas be a pattern going forward, and how will we as an industry adjust to that? It’s now up to us, as an industry, to do our best to be prepared for the opportunity that 2015 will bring.”

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