Total Construction Spending Expected to Drop Next Year

Oct 8, 2009 2:35 PM

Despite the expected recovery of residential building in the second half of 2009, total construction spending on an annual basis is expected to fall 12% this year and 4% in 2010, reveals the “Third Quarter U.S. Construction Briefing” from IHS Global Insight, headquartered in Lexington, Mass. Looking at the market as a whole, real total construction spending is not expected to rebound with double-digit growth on an annual basis until 2011 and 2012.

Pulled down by commercial construction, which faces a 27.9% annual decline this year, non-residential construction remains in a slump, says the forecast, and will continue to do so for the remainder of this year and next. Driven by a single-family market verging on recovery, residential construction, on the other hand, is expected to expand in the second half of 2009, climbing 2.1% quarter-on-quarter in the third quarter and 4.8% in the fourth.

Although it’s been pushed up by a surge in spending on pipelines and refineries, the pace of growth in manufacturing construction brings more grim news. On an annual basis, total manufacturing construction spending is forecast to fall 41.5% in 2010 and another 12% in 2011 before recovering in 2012.

Despite these sobering statistics, certain sectors hold promise for a more optimistic outlook. For example, the report reveals that total spending on hospitals and other health care buildings continues to increase steadily, driven particularly by rapid expansion in public health care construction. Excluding power segment construction, which is expected to decline, infrastructure construction is forecast to rise 6.4% in 2010 and 4.5% in 2011. According to the report, most of the $82 billion in infrastructure investment included in the $787 billion stimulus package will be allocated over the next two years. Finally, spending on transportation infrastructure will see moderate increases in 2010. However, although the stimulus package includes $13 billion for rail projects, transit systems in several major cities are facing deficits equal to at least 12% of their operating budgets.