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Nonresidential Buildings Construction Spending Through 2016

New nonresidential buildings construction starts cash flows indicate spending will continue to grow until Feb-Mar 2016, then drop consistently each month until Q3 2016.  The decline is almost entirely due to big starts from Q3-Q4 2014 finishing and dropping out of the monthly spending numbers. New starts in 2015 did not grow as much as in the previous two years. Although the predicted decline in monthly spending over 6 months is 8%, 2016 may finish with a rate of monthly spending higher than when it started.

The drop and recovery can vary from the predicted shown here and it’s not likely to be so smooth, but new starts from here on forward would really have to skew from a normal growth pattern by a lot to change this pattern by a little.  Nonresidential buildings on average take about 20 to 24 months to complete, so every month we move out adds about 4% to 5% uncertainty to future spending.

This prolonged period of spending declines is sure to cause alarm in the headlines in mid-2016, but the decline and the reversal are supported in large part by starts already booked.  Unless something dramatic and unexpected comes along to throw a wrench in the works, I’m expecting a pattern like this for 2016.

Total nonresidential buildings spending in 2016 will finish the year about 10% higher than 2015.

Snip Constr Spend Nonres 4yr oct15

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