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CMD’s Latest U.S. Put-in-place Construction Spending Forecasts, April 2016 (Part 1)

0 76 Economic

by Alex Carrick

CMD's most recent review of the Census Bureau's put-in-place (PIP) construction investment figures yields a 'current' (i.e., not adjusted for inflation) dollar volume increase in 2016 of +9.0%, which will be a little slower than 2015's +10.6%.
CMD’s Latest U.S. Put-in-place Construction Spending Forecasts, April 2016 (Part 1)

For 2017, the gain is expected to be +8.5%, and for 2018, +7.7%. The full set of numbers is set out in accompanying Table 1. (Parts 2 and 3 of this Economy at a Glance will feature graphs of the main type-of-structure series, along with their trend lines.)

The grand total in 2016 will be led by a residential market that will advance faster, +11.8%, than non-residential activity, +7.2%. Both, though, will reduce stride versus their 2015 rapid hikes of +13.2% and +9.0% respectively.

It bears repeating that the forecast being presented in this EAAG is for the government's put-in-place construction investment numbers, which have many points of difference with CMD's own construction 'starts' series. (CMD's updated 'starts' forecast – i.e., its 2016 Q2 version – will be released in the final week of April.)

A few words of explanation are warranted as to the key ways in which the PIP numbers vary from the starts.

The Census Bureau's PIP figures are analogous to progress payments as projects proceed.

CMD's figures are built up, based on specific project-value estimates, with the full dollar amount entered at the beginning.

Consider a $60 million office tower for which ground is broken this month. It will appear in the Census Bureau's numbers as spending of approximately $15 million this year; $25 million next year; and the final $20 million in another two years from now, in 2018.

For 'starts', the whole estimated value ($60 million) will be entered in April 2016.

Graphs of the 'starts' lead the PIP investment curves. This is to say, the peak in starts will appear before the peak in the PIP series. The same goes for troughs.

The forecasts of the PIP numbers are based on: (1) economic influences such as national output (a.k.a., GDP) growth, interest rates, office vacancy rates, capacity utilization rates, etc. and demographic drivers; (2) the past history of the numbers as revealed in trend lines; and (3) most recent month-to-month, year-over-year and year-to-date performances of 'actual' results.

Parts 2 and 3 of this EAAG will delve deeper into the specifics of the forecasts for the sub-sector type-of-structure categories shown in Table 1.

(Continued in "CMD's Latest U.S. Put-in-place Construction Spending Forecasts, April 2016 (Part 2).")

Table 1: U.S. Construction Spending (put-in-place investment)
(billions of “current” $s)

Type of Construction: 2011 2012 2013 2014 2015 2016 2017 2018
Grand Total 788.3 850.5 906.4 993.4 1,098.5 1,196.9 1,298.7 1,398.6
(year versus previous year) 7.9% 6.6% 9.6% 10.6% 9.0% 8.5% 7.7%
Total Residential 252.6 276.1 329.2 375.1 424.7 474.9 524.7 574.6
9.3% 19.3% 13.9% 13.2% 11.8% 10.5% 9.5%
Total Non-residential 535.7 574.4 577.1 618.3 673.8 722.1 773.9 824.1
7.2% 0.5% 7.1% 9.0% 7.2% 7.2% 6.5%
Total Commercial/for Lease 88.0 96.0 104.6 124.9 144.5 163.9 180.7 195.1
9.1% 9.0% 19.4% 15.7% 13.4% 10.2% 8.0%
Lodging 9.1 10.8 13.5 16.1 21.1 25.0 28.0 30.5
18.7% 24.4% 19.6% 30.6% 18.8% 12.0% 9.0%
Office 36.0 37.8 38.0 46.1 56.0 64.8 72.3 77.7
5.0% 0.5% 21.3% 21.7% 15.7% 11.5% 7.5%
Commercial/Retail 42.8 47.3 53.2 62.7 67.4 74.1 80.4 86.8
10.6% 12.3% 18.0% 7.5% 9.9% 8.5% 8.0%
Total Institutional 155.8 157.0 148.1 147.4 157.8 166.3 174.8 182.5
0.7% -5.7% -0.5% 7.1% 5.4% 5.1% 4.4%
Health Care 40.2 42.5 40.7 38.4 40.0 41.6 43.4 45.6
5.8% -4.4% -5.6% 4.0% 4.0% 4.5% 5.0%
Educational 85.0 84.7 79.1 79.7 84.9 89.5 94.0 97.8
-0.4% -6.6% 0.8% 6.5% 5.5% 5.0% 4.0%
Religious 4.2 3.8 3.6 3.2 3.4 3.2 3.1 3.1
-9.3% -6.7% -9.5% 4.0% -6.0% -1.0% -0.5%
Public Safety 10.4 10.4 9.5 9.4 8.9 8.5 8.7 9.0
0.2% -8.9% -1.3% -5.2% -4.0% 2.0% 3.5%
Amusement and Recreation 16.0 15.5 15.2 16.6 20.7 23.5 25.5 27.0
-3.2% -1.8% 9.4% 24.4% 13.5% 8.5% 6.0%
Total Engineering/Civil 251.3 273.7 273.9 288.3 288.1 305.1 328.3 353.6
8.9% 0.1% 5.3% -0.1% 5.9% 7.6% 7.7%
Transportation 34.7 37.9 39.5 41.8 44.8 47.0 50.1 53.1
9.0% 4.2% 5.9% 7.2% 5.0% 6.5% 6.0%
Communication 17.7 16.2 17.8 17.1 19.5 21.5 23.5 25.7
-8.6% 10.0% -3.9% 14.1% 10.2% 9.5% 9.0%
Power 75.2 97.4 93.3 101.2 87.2 89.2 95.5 103.6
29.6% -4.2% 8.5% -13.8% 2.3% 7.0% 8.5%
Highway and Street 79.3 80.5 81.4 84.2 89.9 101.1 110.2 119.1
1.5% 1.0% 3.5% 6.7% 12.5% 9.0% 8.0%
Sewage and Waste Disposal 22.7 22.3 22.4 23.3 25.0 26.8 28.8 30.9
-2.0% 0.7% 4.0% 7.3% 7.0% 7.5% 7.5%
Water Supply 14.2 13.2 13.6 13.3 13.6 12.8 13.1 13.6
-6.7% 2.9% -1.9% 1.6% -5.5% 2.0% 4.0%
Conservation and Development 7.5 6.2 6.0 7.3 8.1 6.7 7.1 7.7
-17.4% -4.2% 22.7% 10.5% -17.5% 6.5% 8.0%
Total Industrial/Manufacturing 40.6 47.7 50.5 57.8 83.4 86.7 90.2 92.9
17.7% 5.9% 14.3% 44.4% 4.0% 4.0% 3.0%

"Current" means not adjusted for inflation.

Data source: U.S. Census Bureau.
Chart: CMD.

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