"Based on ABC’s Construction Backlog Indicator (CBI), infrastructure-related construction is set to accelerate significantly over the next several months." —ABC Chief Economist Anirban Basu
In a clear sign that the recession may be easing, commercial and industrial investment in the second quarter fell 8.9 percent, according to the July 31 gross domestic product (GDP) report by the U.S. Department of Commerce. This represents a stark improvement over the first quarter nonresidential construction decline of 39 percent.
Compared to the change in GDP last quarter, most of the components within the category of fixed investment fell, but by a moderate degree. Among various components within the nation’s GDP, the biggest decline was in residential construction which fell by 29.3 percent. Investment in equipment and software was down by 9 percent during the quarter, after having fallen 36.4 percent the previous quarter.
Overall, consumer spending fell by 1.2 percent, lead by a 7.1 percent decline in consumption of durable goods. Consumption of services was up by 0.1 percent after having fallen 0.3 percent. Exports were down, but to a much lesser degree than the estimated 7 percent, while imports were down by 15.1 percent. The decline in the nation’s imports compared to exports indicates a contraction of the trade deficit. Government spending was up 5.6 percent; this important component contributed greatly to the softening in the decline of GDP growth.
In all, real gross domestic product fell 1 percent during the second quarter of 2009 following a decline of 6.4 percent during the previous quarter. The second quarter of 2009 marks the fourth consecutive quarterly decline of GDP.
What This Means
“As predicted, the pace at which the U.S. economy is shrinking slowed significantly during the second quarter of 2009. It is important to note, however, that construction activities were not found to be an important factor in this improvement,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The moderation in the economic downturn was largely attributable to other factors, including a shrinking trade deficit and government spending.
“Many nonresidential construction activities continue to be in sharp decline. This is particularly true within the commercial construction segments of the industry, which include construction related to office building, retail space, hotel, and other sectors particularly susceptible to business cycles,” said Basu.
“However, certain nonresidential construction activities will help bring the economy out of recession over the next several months,” said Basu. “Based on ABC’s Construction Backlog Indicator (CBI), infrastructure-related construction is set to accelerate significantly over the next several months.”
