Construction Spending Hits Eight Year High
Every industry has its peaks and valleys, and the construction industry is no exception. Its deepest valley (abyss, really) was of course the Great Recession of the early 21st century. The industry began its climb out of that abyss beginning in 2010, but it didn't really "peak" until this fall. Data from the U.S. Department of Commerce shows that construction spending increased 1.0% between the months of September and October. 1.0% may not look like a lot by itself, but when considering the "bigger picture", that figure translates to a little over a trillion dollars, and a 13% increase in construction spending from October 2014-October 2015. And it wasn't just this fall that was good for the construction industry. The Department of Commerce data indicated that this has been the best year that the industry's had since shortly before the start of The Great Recession in 2007. From January 2015-October 2015, spending on new construction projects was roughly 11% higher than it had been during the corresponding month of 2014.
Southern and western states were the largest beneficiaries of this building bonanza. Northeastern states in many cases were dealing with huge amounts of snow and wintery weather well into spring, while many mid-western projects dried up due to an influx of cheaper foreign oil and a resistance to fracking on public and private lands. Because of these and other issues, economists were surprised to see this upwards jump, as they had only been expecting to see a 0.6% increase at best.
Residential homes represented the greatest amount of construction projects worked on in 2015, with a 1.0 increase seen in this sector between September and October of 2015. Non-residential projects increased by 0.6%, and public construction projects increased 1.4% during this time period.
The analysts at Dodge Data & Analytics expect this trend to continue into 2016. Dodge analysts predict a total construction activity increase of 13% or $675,000,000,000 in the coming year largely due to residential and non-structure construction. An uptick is expected for 2016 in commercial projects in addition to road work, public works, and gas and electricity facilities. An El Nino weather pattern may possibly keep winter mild enough in the eastern part of the country to extend the fall construction season, also increasing data numbers.
While the view is of course much nicer up on the peaks than down in the valleys, experts caution that uncertainty remains concerning construction's seemingly rosy prospects. These include continuing construction labor shortages and supply concerns in some areas due to overseas conflict. The state of the economy and political gridlock affecting Federally funded work may also have a negative impact on upcoming projects. However, experts say that based on current trends and the construction industry growth of 2015, 2016 is poised to be an even bigger year than 2015.