Is the United States economy, and more particularly the construction industry improving? Well, the answer may depend on which politician you ask. However, a look at recent financial reports seems to indicate, yes, the construction industry is heading in the right direction. A recent report by Bloomberg reported that construction spending in the United States rose late last year. According to Bloomberg, outlays increased 1.2%, exceeding the median estimate from 46 economists, who called for a 0.5% gain. According to Bloomberg:
Recent gains in the housing market, spurred in part by mortgage rates near record lows, are helping the construction industry recover from the 18-month recession that ended in June 2009. Public expenditures also climbed during the month, a sign that budget constraints may be easing.
Private construction spending climbed 1% in November from the prior month to $522 billion, the highest level since December 2009. Homebuilding outlays increased 2%, including a 2.6% gain in home improvement. Expenditures on single-family and multifamily housing also improved.
Spending on public construction climbed 1.7%, Tuesday's report said. Federal construction outlays increased 5.3%, the biggest gain since August, to $27.6 billion. Outlays by state and local agencies rose to the highest level since January 2011.
In November, builders broke ground on more homes than at any time in the previous 19 months and construction permits climbed to a one-year high, suggesting housing may not be a drag on gross domestic product next year, data from the Commerce Department showed last month.
Housing starts were at a 685,000 annual rate that month, Commerce Department figures showed Dec. 20. Building permits, a proxy for future construction, increased 5.7%.
Lending more credence to a construction renaissance, is recent financial data by Caterpillar, Inc. the world’s largest maker of construction and mining equipment and United Rentals, Inc., the largest equipment rental company. Both companies surpassed analysts’ expectations. Caterpillar reported a 60% revenue growth on the quarter. While much of this growth is due to Caterpillar’s acquisition of several companies, including mining companies, Caterpillar stated in its earnings call that it sees U.S. growth to increase at least 3%, and housing starts to increase approximately 100,000 units in 2012 over 2011. Robert McCarty of Chicago-based Robert W. Baird & Co. has said in a recent report:
U.S. construction spending has risen 5.8 percent through November from March, when it reached the lowest level since October 1999, according to U.S. Census Bureau data. U.S. earthmoving-machinery volumes will increase as much as 12 percent in 2012.
Likewise, United Rentals reported a fourth quarter revenue increase of 19%. United Rentals stated in its earnings conference call that:
At the macro level, the leading forecasters predict a rebound in non-res construction of just over 2% on average in 2012 and about 6% in 2013. And this is supported by the architectural billing index, which came in above 50 for every month in the fourth quarter in our sweet spot the Commercial and Industrial sectors.
Lastly, in the President’s State of the Union address, he called for an increase in construction infrastructure spending, particular in the power and energy sector and promised to sign an Executive Order that will clear up red tape that slows down construction projects.
Together, while this does not forecast a return to the boom days of just a few years ago, it does show that construction, and the construction industry, are on an up-tick.