2012 to be “slow year” for US construction

Non-residential construction spending in the US will reach US$ 554 billion in 2012, up +2.4% compared to this year, according to the latest analysis from the Associated Builders & Contractors (ABC).

However, this headline growth would actually show only gradual progress in real terms after construction spending fell by -2.4% in 2011.

Overall, ABC forecasts public non-residential construction spending will slip -2% in 2012, while private non-residential spending is forecast to grow +6.9%.

ABC chief economist Anirban Basu said, "The pace of recovery in the nation's non-residential construction industry remains soft and 2012 is positioned to be a year of slow gain. The first half of 2012 may be particularly challenging, a reflection of the soft patch in economic activity experienced during much of the first half of 2011."

Certain segments are better poised for growth than others. Spending in the US power construction industry, for example, is forecast to expand +9% in 2012, while healthcare construction spending is expected to grow +8%.

Offsetting this, the impact of tight state and local government budgets is forecast to result in -4% lower construction spending in education.

Materials costs

But Mr Basu said there could be a degree of relief for construction contractors with respect to materials prices. In 2011, prices for construction inputs rose +7.5%, but the ABC expects this to slow in 2012, with the cost of materials forecast to rise +4.7%.

However, input costs for contractors are subject to currency fluctuations, and Mr Basu warned that the direction of the US dollar was "far from obvious".

Meanwhile, the ABC national construction backlog indicator stood at 8.1 months for both the second and third quarters of 2011, and Mr Basu said this was not expected to advance substantially in 2012.

"A backlog of less than 8 months is associated with construction spending declines, while a backlog exceeding 8 months is statistically associated with future construction spending increases. Today's level of backlog is consistent with flat construction spending," he said.