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Construction Spending 2015 and 2016

Here’s a peak at expected annual Construction Spending for 2015 and 2016.

Spend Early 2016 Estm Compare

My predictions (GBCo) include the latest actual construction spending data released Nov. 2nd for September spending. This updated projection also includes revised future spending based on Dodge Data & Analytics construction starts released at the DDA Outlook 2016 conference Oct. 30th. My prediction for total spending in 2015, now at $1.075 trillion, hasn’t changed much (up 0.7%) since August. However, for next year my projection has increased from $1.150 to now expecting total spending of $1.190 trillion in 2016. Both projections will be further refined in my winter economic report.

Why are my predicted values so much higher than other estimates?

I put emphasis on using the cash flows from all previously recorded construction starts to predict future construction spending. I’ve talked about and documented in past reports the correlation between these two data sets. For 2015, with only three months left to go, 80% to 90% of all starts that will generate spending in the final three months are already in place.

Very little affect on total 2015 spending will be brought about by new construction starts in the 4th quarter. New starts could crash to a level less than one half of current trends and that would still not affect total spending enough to get below $1.050 trillion for the year. In order to have the final total spending come in less than $1.040 trillion, the rate of spending for each of the next three months would need to drop off to the level of a year ago. That is not what the cash flows are indicating. In fact, cash flows are indicating spending will increase in the final three months of 2015. The cash flow plot provides us with the direction and the rate of change, but not the actual value of spending.

Starts Cashflows Nov 15 rvsd

 

With the September actual spending values included in the data, the statistical average of predicted spending for 2015 is $1.073 trillion. My cash flow analysis by sector predicts 2015 will finish at $1.075 trillion. In 11 out of 14 years, the actual final value has been within 0.5% of the predicted.

The statistical analysis gives a predicted range for total 2015 annual spending between $1.066 trillion and $1.086 trillion. The actual spending total has not fallen outside the statistical range since 2001, as far back as I’ve been tracking the data. I’m confident that total spending for the year will fall within this predicted range.


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