"This GDP release shows that nonresidential construction momentum stalled during 2012’s initial quarter. But because the economy has improved since last September, the expectation is that nonresidential construction data will be more upbeat during the months ahead." —ABC Chief Economist Anirban Basu.
Nonresidential fixed investment in structures dropped 12 percent in the first quarter of 2012 following a 0.9 percent decrease in the fourth quarter of 2011, according to the April 27 Department of Commerce Gross Domestic Product (GDP) report. Nonresidential fixed investment in equipment and software increased 1.7 percent for the quarter after a 7.5 percent increase in the previous quarter. Overall, nonresidential fixed investment fell 2.1 percent in the first quarter of 2012 following a revised 5.2 percent increase in the previous quarter.
Residential fixed investment jumped 11.9 percent during the past three months following an 11.6 percent increase the previous quarter. Exports increased 5.4 percent for the quarter, with exports of goods rising 4.1 percent and exports of services rising 8.6 percent. Imports also saw an increase, up 4.3 percent for the quarter, with imports of goods up 3 percent and imports of services up 11 percent.
Federal government spending fell 5.6 percent in the first quarter of 2012 following a 6.9 percent decrease in the previous quarter. National defense spending decreased 8.1 percent in the first three months of 2012 while federal nondefense spending decreased 0.6 percent. State and local government spending was down for the seventh straight quarter, with spending decreasing 1.2 percent during the past three months.
Personal consumption expenditures increased 2.9 percent for the quarter, with expenditures of goods increasing 6.2 percent and expenditures of services increasing 1.2 percent. Changes in real private inventories added 0.59 percent to the first-quarter change in real GDP. Real final sales of domestic product, which is GDP minus the change in private inventories, increased 1.6 percent in the quarter following a revised 1.1 percent increase in the fourth quarter.
Gross domestic purchases – purchases of goods and services by U.S. residents wherever they are produced – increased 4.6 percent for the quarter following an increase of 4.3 percent in the previous quarter.
Overall, real GDP increased 2.2 percent in the first quarter of 2012, after a revised 3 percent increase in the fourth quarter of 2011.
Analysis
“Today’s GDP report extends the string of negative data releases for nonresidential construction activity in America,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Previous releases showed declines in employment, backlog, and construction spending. This GDP release shows that nonresidential construction momentum stalled during 2012’s initial quarter. In addition, output was down substantially in a number of key economic segments, apparent in the 12 percent decline in nonresidential fixed investment in structures.
“Overall, today’s report was disappointing,” Basu said. “The consensus forecast had called for 2.5 percent GDP growth during the first quarter on an annualized basis, but the actual figure came in at 2.2 percent, and much of the disappointment showed up in the nonresidential construction category.
“This performance is at least partially a reflection of the economic soft patch that overtook the economy early last year. Construction tends to lag the overall economy and the economic weakness of that period appears to be translating into diminished nonresidential construction activity today,” Basu said. “Because the economy has improved since last September, the expectation is that nonresidential construction data will be more upbeat during the months ahead.
“Most of the good news in today’s GDP release pertains to consumer-related activity, which is a net positive for commercial construction,” Basu said. “For instance, personal consumption expenditures were up 2.9 percent and residential fixed investment was up 11.9 percent. The ongoing growth in U.S. exports was also positive, including for the industrial real estate market."