Patterns in commercial construction output vary in the UK, Europe and USA, a range of recent official reports indicates.
Figures from the US Census Bureau show that сommercial construction spending during May 2017 was estimated at a seasonally adjusted annual rate of $1,230.1bn, nearly the same as (±2.5%) the revised April estimate of $1,230.4bn.
The May figure is 4.5% (±2.5%) above the May 2016 estimate of $1,177.0bn. During the first five months of this year, сommercial construction spending amounted to $469.2bn, 6.1% (±1.3%) above the $442.4bn for the same period in 2016.
Private spend down
Spending on private construction was at a seasonally adjusted annual rate of $943.2bn, 0.6% (± 0.7%) below the revised April estimate of $949.3bn. Residential construction was a seasonally adjusted annual $509.6bn in May, 0.6% (±1.3%) below the revised April estimate.
Non-residential construction was at a seasonally adjusted annual rate of $433.6bn in May, 0.7% (± 0.7%) below the revised April estimate of $436.7bn. In May, the estimated seasonally adjusted annual rate of public construction spending was $286.9bn.
This was 2.1% (±5.3%) above the revised April estimate of $281.0bn. Educational construction was at a seasonally adjusted annual $74.3bn. This is 5.1% (±3.3%) above the revised April estimate of $70.7bn.
Highway construction was at a seasonally adjusted annual rate of $90.6bn, 0.9% (±16.9%) below the revised April estimate of $91.5bn.
Independent broker Liberum on the USA
- Non-resi construction recovery is continuing
- Non-resi construction sentiment has improved in every quarter since Q1 2010
- The change in annual US public construction spend has remained positive since 2011
- Consensus predicts 5.6% construction growth in 2017 YoY
- In April, the Construction Products Association (CPA) increased its forecast for commercial construction output for 2017, 2018 and 2019
UK ouput down
Commercial construction output fell in the UK in May 2017 by 1.2%, in both the month-on-month and three-month on three-month time series. These figures from the Office for National Statistics appear in its most recent report, published 7 July.
The three-month on three-month decrease represents the largest such fall in output since September 2012. It is driven by falls in both repair and maintenance, and all new work. The main downward pressure on month-on-month growth came from all new work.
This was most notable in infrastructure, which fell 4.0% following strong growth in April 2017. Commercial construction output also fell month-on-year, falling by 0.3% in May 2017, the first consecutive month-on-year decrease in output since May 2013.
Commercial construction output for April 2017 has been revised up 0.5% points from negative 1.6% to negative 1.1%. The ONS figures are echoed in the industry's monthly purchasing manager indices. The figure for total activity fell to 54.8 in June, down from 56.0 in May.
According to Liberum
- After a strong start to 2017, there was a 12.7% decrease in construction levels in May versus April
- The number of construction projects within the UK decreased 3.6% in May versus a year earlier
- UK Construction PMI has recovered since the Brexit vote (it was 45.9 in July 2016)
- New work increased 0.4% in Apr 2017 versus Apr 2016 due to strength at public housing, infrastructure and private commercial
- Work on repairs and maintenance decreased 2.5% in Apr 2017 versus Apr 2016, largely due to weakness in public housing
EU picture perkier
The broader European Union picture looks perkier. According to figures from Eurostat, the EU's statistical office, in April 2017 compared with April 2016, commercial construction output increased by 3.2% in the euro area and by 2.7% in the EU28.
In April 2017 compared with March 2017, seasonally adjusted commercial construction output increased by 0.3% in the euro area (EA19), while it remained stable in the EU28. In March, production in construction fell by 1.1% in the euro area and by 0.5% in the EU28.
Among member states for which data are available, the highest increases in production in construction were recorded in Sweden (+3.8%), France (+3.5%) and the Czech Republic (+1.6%), and the largest decreases in Romania (-7.7%), Italy (-4.1%) and Hungary (-2.6%).
In its 2017 global construction industry outlook, debt rating agency Moody's wrote of moderate growth in EMEA and modest growth opportunities in the US. In the US it sees growth in low single digits with competitive market conditions limiting margin upside.
Residential construction will grow at a modest pace driven by low interest rates, healthy job creation and low debt service ratios. Inventory shortages will limit the upside. Non-residential construction should continue its gradual recovery.
Growth could accelerate supported by $305bn in transportation funding and additional government infrastructure investment.
Moody's expects very modest growth in Canada with competitive conditions limiting margin upside Residential construction growth will likely slow to a more modest pace due to new mortgage rules and capital gains tax changes.
Non-residential construction could recover along with commodity prices and infrastructure investment.