Associated Builders & Contractors reported that total nonresidential construction spending increased 0.9% in November to a seasonally adjusted annual rate of $555.7 billion, according to the Jan. 3 report by the U.S. Commerce Department. However, total nonresidential spending is down 0.1% from one year ago.
Private nonresidential construction spending was unchanged for the month, but is 4.5% higher than November 2010. Public nonresidential construction jumped 1.8% in November, but is still down 4.4% year-over-year.
“November’s nonresidential construction performance was solid and the increase in spending encompassed both private and public construction,” said ABC Chief Economist Anirban Basu.
So that’s where we’re at these days — up a little bit but still down.
According to the ADP National Employment Report, the construction sector added 26,000 jobs between November and December. The report is based on payroll data. ADP said that total private-sector employment rose by 325,000 for the same period.
Fortunately, all the signs are pointing up for 2012. It’s not great, but it’s going in the right direction.
You can read our industry forecast for 2012 starting on page 1 of this issue. One of the better sources is construction consulting firm FMI Corp., whose insights most of our interview subjects agree with.
FMI, Raleigh, N.C., is forecasting a 3% increase in 2012 for construction put-in-place in 2006 dollars to show the effects of inflation. In current dollars it’s a nominal 6% increase.
“Our forecast calls for a 12% increase in residential construction for 2012,” FMI said in its Construction Forecast. “While that appears to be a strong recovery, consider housing is just starting to move off the bottom. The total represents stronger multifamily construction and home improvements as well as single-family housing; however, the total of $303.9 billion is equivalent to 1997 CPIP. In constant 2006 dollars, the gain is more like 9% for 2012.”
On the commercial side, FMI data shows CII market sectors bottoming out in either 2010 or 2011 and beginning to increase in 2012. The two exceptions are religious buildings and public safety, both of which FMI is forecasting to bottom out in 2012 and resume growth in 2013.
Chris Peel, chief operating officer for Rheem, said the common wisdom is that the plumbing and HVAC markets will be up 3%-6%, but he thinks it will be more like 1%-3% on the commercial side. Residentially, he believes 2012 water heater sales will increase by 1%-2%, but the residential HVAC market will be flat. The only hotspot in the water heating market is tankless, Peel said, but he was quick to point out that tankless sales are less than 4.5% of the total water heating market.
Peel also pointed out an interesting market dynamic — Rheem and most other suppliers are minimizing the importance of the new construction market.
New construction accounts for only 10% of the water heating market, he noted; in 2006 it was 20%.
“On the HVAC side, we’re hanging steady at 15%-17% of the market for new construction, which is substantially lower than the 2005-2006 timeframe,” Peel said. “Most of our competitors in the spaces we serve have adjusted their businesses for the new construction market being borderline to non-existent.”
Anthony J. Guzzi, president and CEO of EMCOR Group, expects a slight upturn in 2012, in line with the FMI Construction Outlook.
“Absent our acquisitions, our backlog is up 30%,” Guzzi said, “but it had fallen in half from the peak to trough. So going back up is a good sign, although it’s not a broad-based recovery in commercial, and residential has to eventually come up.”
Given the uncertain economic climate, such as the Euro crisis that may destabilize the world economy, it’s difficult to forecast.
“We live in an economy right now that if we have a three- to six-month window, that’s as good as it gets,” Guzzi said.
Plumbing-Heating-Cooling Contractors – National Association President Keith Bienvenu said there are some positive economic and industry trends occurring throughout the country.
“This leads me to think business will be slightly better than 2011,” said Bienvenu. Contractors, however, are still uneasy, Bienvenu said, making them reluctant to start new initiatives or hire new employees.
Remember 2009? Still gives me the creeps, just thinking about it. Employment is increasing, retailers had a good Christmas, American car companies are booming. Things will get better.
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