Recent trends and outlook for construction spending

Trends and outlook for construction spending are an important indicator for economic growth. This is mainly because one of the strongest signs that the economy is growing is a boom in construction spending. All over the world, this is the case, because when there is economic growth, people in many high growth sectors invest on construction as a means for getting higher returns. Investing on construction also means increased employment opportunities, as well as indicating a high increase in economic activity. This is why trends and outlook for construction spending indicate the state of the economy, both in the short and long runs.

The construction industry in the US is usually segmented into these areas:

  • Residential
  • Nonresidential, consisting of commercial, institutional and public works.

A detailed study of the trends and outlook for construction spending in the US for 2012 to 2016 carried out by Ernst and Young (E & Y), available at http://www.ey.com/media/vwCodeLibraries/TDW2014/$File/CFO_Joint_2015%20McGraw_Hill_Construction_Outlook_McCook_FINAL.pdf threw up these highlights:

Residential buildings

In this sector, there has been a wavy trend. Spending increased over all these years, but in significantly different ways: spending in 2012 grew by 31 percent over the previous year. This declined to 26 percent in 2013 and declined further in 2014, growing by only 12 percent. However, trends and outlook for construction spending have shown a marked improvement in the next two years, going up by 20 percent in 2015 and likely to shoot up to 27 percent in 2016.

Commercial buildings

Trends and outlook for construction spending for this sector has been relatively less undulating, although the sad news is that there has been a steady decline, rather than an improvement in construction spending. Growing by just 3 percent in 2012 from 2011; trends and outlook for construction spending for commercial buildings showed a drastic rise to 25 percent in 2013, but after that year, there has been a decline, to 19 and 10 percent in the next two years, leading trends and outlook for construction spending to be forecast for 13 percent in 2016.

Public works

In this sector, trends and outlook for construction spending show recovery of sorts in 2015, which is likely to be improved upon in 2016. Following a fall to -10 and -12 percent in 2013 and 2014 respectively; trends and outlook for construction spending showed an improvement to a five percent growth in 2015, because of which trends and outlook for construction spending point to an increase to 10 percent for 2016.

Institutional building

This is one sector that has been showing consistent and steady trends and outlook for construction spending. From -9 percent in 2012 from 2011; trends and outlook for construction spending for institutional buildings managed to reach the surface at 0 percent in 2012. However, from there, it has gone up steadily. Trends and outlook for construction spending show that institutional building investment rose to 10 percent in 2015, leading analysts to forecast that trends and outlook for construction spending will go up to 17 percent in 2016.

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