The overall value of construction activity throughout the United States grew handsomely in the second quarter, albeit at a slower pace when compared with the first quarter.
The most recent figures from the United States Department of Commerce show that in the three months to June, the seasonally adjusted value of investment in residential fixed structures throughout the US rose by 9.7 per cent while investment in non-residential structures was up 5.3 per cent.
Despite the apparent strength implied by the figures, however, Associated Builders and Contractors chief economist Anirban Basu has issued a surprisingly downbeat assessment of the state of the sector, especially when it comes to non-residential construction.
Basu says a number of factors were behind what he calls a ‘slump’ in the domestic economy and the non-residential construction industry.
“The slump continues as both the U.S. economy and [growth in] non-residential construction slowed during the second quarter of the year,” the chief economist says. “There are a number factors to point your finger at, including the ongoing economic slowdown in much of the world, such as Europe, China and India, along with concerns regarding America’s impending fiscal cliff.”
That ‘fiscal cliff’ relates to a January 1, 2013 deadline, after which US Congress previously agreed in a deal that automatic federal government spending cuts would be triggered unless a bipartisan committee can devise a comprehensive plan to reduce the federal government deficit.
Basu says the US fiscal deficit is a particular cause for concern, not just because of its immediate effect on investment in public sector buildings and infrastructure, but also because of the level of uncertainty it is creating for business decision makers.
He says the current state of government finances means that any genuine recovery in non-residential construction will need to be driven by the private sector.
“However, private construction decision-makers are not yet of the mind to push a significant volume of projects forward,” Basu says. “Given the inability of Congress to create greater certainty regarding the direction of tax and budgetary policy in 2013, ongoing economic turbulence in Europe and in much of the balance of the world, and corporate America’s focus on aggressively managing bottom lines, the economy is unlikely to pick up significantly during the months ahead.”
“This is not a positive sign for the nation’s non-residential construction industry.”
