Nonresidential Spending Emerges as Leading Economic Engine, According to Third-Quarter Marcum Commercial Construction Index
New York City, NY – The Marcum Commercial Construction Index for the third quarter of 2015 reports the most optimistic outlook for nonresidential construction spending since before the recession of 2008. While spending ($692.8 billion) fell in September for the first time in eight months, the nonresidential construction sector exhibited its largest year-over-year increase since April 2008, five months before the pre-recession nonresidential construction spending peak. The index is published by the Construction Industry group of Marcum LLP, a top national accounting and advisory services firm.
Seven of 16 nonresidential construction subsectors experienced spending increases in September on a monthly basis, including Education, Religious, Amusement and Recreation, Transportation, Highway and Street, Sewage and Waste Disposal, and Water Supply.
While spending in the remaining nine nonresidential construction segments fell for the month – including Lodging, Office, Commercial, Healthcare, Public Safety, Communication, Power, Conservation and Development, and Manufacturing – seven of these increased on a year-over-year basis.
Reflecting 77 months of economic recovery, private sector spending continued to be strong. Surprisingly, public sector nonresidential spending also expanded, logging 19 consecutive months of year-over-year growth. Highway and street-related spending led the trend.
“Public spending is finally supplying a boost for contractors, helping to lift backlog levels higher. This is largely attributable to rebounding revenues among state and local governments and greater confidence in allocating funds toward capital budgets,” said Marcum Chief Construction Economist Anirban Basu, author of the report. As of September, nonresidential construction had regained 88 percent of the spending lost during the sector’s downturn, and Mr. Basu predicts the sector could be fully recovered by next year.
Nonresidential construction accounted for 6800 of the 8000 construction jobs added in September on a seasonally adjusted basis. As a whole, construction registered one of the best performances of any industry, with 205,000 positions added since August 2014 and the construction unemployment rate improving 1.5 percentage points.
“Industry employment growth would have been even more rapid, but for the fact that many contractors are experiencing greater difficulty filling available positions. Many contractors are now turning away work for the first time in years,” Mr. Basu reports.
“If you pull back on the data and look at it from 30,000 feet, you can see that nine of the 16 sub-sector categories demonstrate double-digit growth year-over-year, including some remarkable results, such as 20% growth in office-related spending, 30% growth in amusement and recreation, and 41% growth in manufacturing,” said Joseph Natarelli, Marcum’s national construction industry leader and partner-in-charge of the Firm’s New Haven office. “Should the Federal Reserve decide to make corrections to historically low interest rates in the coming year, we will have some challenges to face. But based on the strength of the construction employment data reported in this index – 125,000 fewer unemployed construction workers – and on the momentum we have built to date, I think the industry will still be smiling come spring.”
Marcum LLP’s Construction Industry group provides strategic and timely accounting, audit, and consulting and taxation services to construction clients ranging from start-ups to multi-billion-dollar enterprises. The Firm’s technical experts serve on many industry boards and committees and regularly contribute to construction conferences and publications.
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