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Nonresidential construction spending is likely not as weak as it seems, Accessible Data
Figure 1. Sectors Indexed by 2019 Average Value
The x-axis of the chart begins in the fourth quarter of 2018 and ends at the third quarter of 2022. The y-axis is labelled “Billions of Chained 2012 Dollars, Indexed”. It starts at 0.7 and ends at 1.7 with intervals of 0.25. There are five lines depicted in red, black, light blue, brown, and green. These lines depict the value of five sectors indexed by their 2019 average value. These sectors are GDP, residential investment, nonresidential investment excluding drilling and mining, personal consumption expenditures, and equipment and intangibles, respectively. All lines begin around 1 in the fourth quarter of 2018 except nonresidential investment, which begins around 0.94. Nonresidential investment reaches 1.04 by the fourth quarter of 2019, and then gradually decreases until it hits 0.77 by the third quarter of 2022. The residential investment line stays around 1 until it hits 1.05 in the first quarter of 2020, falls to 0.97 in the second quarter of the same year, and then rebounds, increasing until the second quarter of 2021 at a value of 1.21. Then it decreases gradually until hitting 1.16 in the first quarter of 2022, at which point it drops off steeply, ending at 1.02 in the third quarter of 2022. The residential investment line begins at 0.99 and stays there until it ticks up to 1.05 in the first quarter of 2020. It then drops to 0.97 in the second quarter of 2020 before increasing quickly to 1.21 in the first quarter of 2021. It then steadily drops off until it reaches 1.02 in the third quarter of 2022. The remaining three lines track each other closely until the fourth quarter of 2020. They begin at 1 in the fourth quarter of 2018 and remain there until the first quarter of 2020, at which point they fall to 0.91, and then finally spring back up to 0.99 in the fourth quarter of 2020. At this point, they all increase gradually with slightly different slopes. GDP has the smallest slope, ending at 1.05 in the third quarter of 2022. Meanwhile, PCE ends at 1.08 and E&I ends at 1.15.
Figure 2. Sector-Specific Indicators
Left Chart. Dodge Indicatos
The x-axis of this chart begins at the first quarter of 2017 and ends at the fourth quarter of 2022. The y-axis ranges from 40 to 150 at intervals of 20. There are three lines depicted: square-footage of projects (black), number of projects (red), and real value of starts (blue). All three lines are fairly volatile. The black line starts at 90.98, climbs to 102.97 by May 2017, and hovers between 90.12 and 111.88 until May 2020 when it falls to 85.96. It continues to fall until July 2020 when it reaches 68.70, and begins to climb steeply with some volatility until reaching 134.48 in September 2022. The red line starts below the black line at 83.71 and remains volatile until October of 2019, remaining in a range between 83 and 97. It then climbs steeply until January of 2020 at 124.81, falls until January 2021 at 77.50, and then climbs with some volatility, ending at 112.93. The blue line begins at 101.93 in January of 2017, spiking up to 112.32 in September of 2017, and then vacillates between 88.37 and 110.77 between October 2017 and April 2020. It then falls to its lowest point in the chart at 56 in July of 2020. From there it gradually increases to 119.23 in February 2022, falls to 87.52 in June 2022, picks back up to 132.42 in September 2022, dips to 103.98 in November 2022, and ends at 122.76 in December 2022.
Note: 3-month moving averages of seasonally adjusted series for nonresidential buildings. The real value of starts is the nominal value deflated using BEA prices.
Source: DDA, BEA, and authors’ calculations.
Right Chart. Other Indicators
The x-axis spans from Q1 2017 through Q3 2022. There are two y-axes. The left y-axis, labeled “Index”, is black and spans from 25 to 75 5n intervals of 5. The right y-axis, labeled “Thousands”, is red and spans from 2800 to 4000 in intervals of 120. The graph displays two lines: Architectural Billings Index (black) and Nonresidential Construction Employment (red). The red Nonresidential Construction Employment line corresponds with the right-hand “Thousands” axis, while the other two lines correspond with the left-hand, Index axis. The Architectural Billings Index line begins at an index of 48, shoots up to 54.5, and remains between 48 and 54.8 through March 2020. Then it falls to 29.60 in April 2020, rebounds to 46.2 in September 2020, dips again to 42.10 before rising to an index of 58.30 in May of 2021. It then gradually reduces to a minimum of 51.80 in December 2021, spikes to 56.40 in March 2022, and then gradually decreases until ending at 48.40 in December of 2022. The Nonresidential Construction Employment line begins at 3225.50 in January 2017 and gradually increases to 3544.30 in February of 2020. It then falls to 3013 in April of 2020 and immediately rebounds in May to 3221.10. It increases slowly through January 2021, at which point it takes a value of 3317, but falls in February 2021 to 3280.70. It then climbs gradually until hitting 3519.90 in December 2022.
Note: Nonresidential employment for building construction and specialty trade workers.
Source: CES and American Institute of Architects.
Figure 3. NRS in Each Quarter Through 2022Q3
Left Chart. Models
The x-axis spans from the first quarter of 1998 through the fourth quarter of 2022. The y-axis ranges from 5.25 to 6.5 at an interval of 0.25 and is labelled “Log scale”. There are three lines in this chart: a black line labelled “NRS data”, a red line labelled “Dodge Value Model”, and a blue line labelled “Dodge Sqft Model”. The NRS data line begins at 6 in the first quarter of 1998 and climbs gradually to 6.15 in the third quarter of 2000. It then falls to 5.85 in the first quarter of 2003 and ranges between 5.88 and 5.84 until the first quarter of 2006 when it ticks up to 5.89 and continues to increase until the second quarter of 2008 at 6.17. It then drops to 5.65 in the second quarter of 2011 before climbing gradually once again, reaching a maximum of 6.15 in the fourth quarter of 2019. It then gradually decreases, reaching 5.85 in the third quarter of 2022. The Dodge Value Model line begins at 6.07 in the fourth quarter of 2001 and falls to 5.83 in the second quarter of 2004 and ranges between 5.83 and 5.86 until the first quarter of 2006 when it ticks up to 5.88 and continues to increase until the third quarter of 2008 at 6.13. It then drops to 5.66 in the third quarter of 2010 before climbing gradually once again, reaching a maximum of 6.14 in the fourth quarter of 2017. It then gradually decreases, reaching 5.96 in the first quarter of 2022, before swinging back up to 6.08 in the third quarter of 2022. The Dodge Sqft Model line begins at 6.05 in the fourth quarter of 2001 and falls to 5.84 in the first quarter of 2004, and increases gradually until reaching 6.19 in the second quarter of 2008. It then drops to 5.7 in the first quarter of 2010 before climbing gradually once again, reaching a maximum of 6.17 in the third quarter of 2018. It then gradually decreases, reaching 5.97 in the second quarter of 2020, before swinging back up to 6.14 in the third quarter of 2020. It then falls to 5.88 in the second quarter of 2021, and then increases once again to end at 6.01 in the third quarter of 2022.
Source: For NRS data, the BEA; DDA; and authors’ calculations.
Right Chart. Model Residuals
The chart’s x-axis begins in the first quarter of 1998 and spans through the third quarter of 2022. Its y-axis spans from -0.25 to 0.25 at intervals of 0.1 and is labelled “Log scale”. The two lines in the chart are a red “Dodge Value” line and a blue “Dodge Sqft” line. These lines represent respective model residuals. The Dodge Value line begins in the fourth quarter of 1999 at 0.01. It is very volatile, jumping to 0.09 in the third quarter of 2000, dipping to -0.1 in the third quarter of 2002, and then leaps back up to -0.01 in the second quarter of 2003. It remains within a range from -0.04 to 0.03 from the second quarter of 2003 through the second quarter of 2007. It increases sharply to 0.08 in the fourth quarter of 2007, dips to 0.02 in the first quarter of 2009, increases to 0.08 in the third quarter of 2009, falls again to -0.11 in the first quarter of 2011. It climbs inconsistently to 0.11 in the first quarter of 2014 before falling, again inconsistently, to -0.07 in the fourth quarter of 2017. It then increases inconsistently until reaching 0.05 in the first quarter of 2021 before falling precipitously to -0.24 in the third quarter of 2022. The Dodge Sqft line begins in the fourth quarter of 2001 at -0.02, where it stays until dropping to -0.06 in the third quarter of 2003. It increases suddenly to 0.03 in the second quarter of 2003 and then decreases gradually, with some volatility, until hitting -0.1 in the fourth quarter of 2006. It jumps suddenly to 0.08 in the fourth quarter of 2007, oscillating between -0.03 and 0.8 from the fourth quarter of 2007 and the third quarter of 2010. It then falls to -0.15 in the first quarter of 2011, increasing quickly to 0.04 by the third quarter of 2012. It falls again to -0.05 in the first and second quarters of 2013, increasing to 0.09 by the second quarter of 2014 and continues to oscillate until hitting 0.14 in the second quarter of 2015. It continues to be fairly volatile, remaining in a range of 0.06 and 0.16 between the second quarter of 2015 and the first quarter of 2017. It then begins to drop, this time varying between -0.09 and 0.03 until the first quarter of 2020. Then the line jumps up to 0.11 in the second quarter of 2020, falling to -0.09 in the third quarter of 2020, and rises again to 0.11 in the second quarter of 2021. Then the line falls precipitously to -0.16 in the third quarter of 2022.
Note: Model predicted values and residuals estimated using data from 2002 to 2019.
Figure 4. BEA's NRS Deflator and Private Nonresidential Construction
Left Chart. Impact of timing on NRS deflator
The x-axis begins at the fourth quarter of 2017 and runs through the fourth quarter of 2022. The y-axis spans from 0 to 0.06 at intervals of 0.01 and is labelled “Log change”. There are two lines in this chart, one black line labelled “Published deflator” and one red line labelled “Backward-looking deflator”. The published deflator line begins at 0.0054 in the fourth quarter of 2017, and then begins to oscillate from 0.0095 to 0.0135 to 0.0099 for the next three quarters. It slowly decreases until it hits 0.0007 in the fourth quarter of 2020 and then jumps up to 0.0578 in the fourth quarter of 2021. It then falls to 0.0407 in the first quarter of 2022, increases a bit to 0.0461 in the third quarter of 2022, and then falls to end at 0.0199 in the fourth quarter of 2022. Meanwhile, the red line begins at 0.0067 in the fourth quarter of 2017. It increases very gradually and very slightly until the second quarter of 2019 at 0.108, and then begins to decrease equally gradually until hitting 0.0059 in the fourth quarter of 2020. Then it increases with a steeper slope for seven straight quarters, hitting its peak at 0.0368 in the third quarter of 2022, before ticking down slightly to end at 0.0347 in the fourth quarter of 2022.
Note: Backward-looking deflator is a weighted average of the NRS deflator using 2021 time-to-build weights.
Source: BEA, Census, and authors’ calculations.
Right Chart. Vintages of Private Nonresidential CPIP
The x-axis starts in the fourth quarter of 2018 and stretches through the fourth quarter of 2022. The y-axis starts at 420 and ends at 600 with intervals of 20, and is labelled “Billions, saar”. There are nine lines on this graph. Each line represents a vintage of private nonresidential CPIP forecasts. The vintages displayed are monthly and include June 2022 through February 2023. Each monthly vintage line ends one month later than the previous month. The July 2022 through the February 2023 vintage lines are identical from the beginning of the chart through March 2022, while the June 2022 line is unique. The June line begins at 459.21 and increases steeply until reaching 526.68 in November of 2019. It ticks down to 520.01 in December 2019, back up to 526.95 in January of 2020, and then falls rapidly, hitting its nadir at 442.16 in December 2020. It springs up to 463.40 in January of 2021, falls slightly to 459.99 in June of 2021, and then climbs steadily until February 2022 at 507.90. It finally ticks down and ends in April 2022 at 503.20. The other eight lines begin at 463.06 in October 2018 and follow a similar slope as the June 2022 line upward, hitting their peak at 530.78 in November 2019. They then gradually edge down, remaining between 475.93 and 499.79 from April 2020 through January 2022. They then increase slightly, hitting 503.22 in February 2022 before ticking back down to 500.6 in March 2022. From here, each successive monthly vintage behaves slightly differently. The July 2022 line hits 499.94 in April and 497.85 in May of 2022, then ends. The each of the remaining seven lines hits 499.52 in April 2022. The August 2022 line then hits 495.25 and 492.68 in May and June 2022, respectively, and then ends. Each of the remaining six lines hits 501.09 in May 2022. The September 2022 line hits 502.07 and 503.88 in June and July 2022, respectively, then ends. The remaining five lines hit 514.26 in June 2022. The October 2022 line hits 513.56 and 513.05 in July and August 2022 and then ends. The remaining four lines hit 526.92 in July of 2022. The November 2022 line hits 526.91 and 532.30 in August and September 2022, and then ends. The remaining three lines hit 532.43 in August 2022. The December 2022 line hits 537.62 and 533.16 in September and October of 2022 and then ends. The last two lines both hit 552.23 in September of 2022. The January 2023 line hits 549.16 and 558.34 in October and November 2022, then ends. The February 2023 line hits 561.41, 572.93, and 569.98 in October, November, and December of 2022, and then ends.
Source: Census.