Nonresidential fixed investment drops 12% in Q1 2012

| April 27, 2012

The Associated Builders and Contractors (ABC) says that nonresidential fixed investment in structures dropped 12 percent in the first quarter of 2012 following a 0.9 percent decrease in the fourth quarter of 2011, according to the April 27 Department of Commerce Gross Domestic Product (GDP) report.

ABC reports that nonresidential fixed investment in equipment and software increased 1.7 percent for the quarter after a 7.5 percent increase in the previous quarter. Overall, nonresidential fixed investment fell 2.1 percent in the first quarter of 2012 following a revised 5.2 percent increase in the previous quarter, according to ABC’s April 27 Construction Economic Update report.

ABC Chief Economist Anirban Basu says that this GDP release shows that nonresidential construction momentum stalled during 2012’s initial quarter. In addition, Basu notes that output was down substantially in a number of key economic segments, apparent in the 12 percent decline in nonresidential fixed investment in structures.However, he says, because the economy has improved since last September, the expectation is that nonresidential construction data will be more upbeat during the months ahead.

“Overall, today’s report was disappointing,” Basu says in his analysis in the Construction Economic Update. “The consensus forecast had called for 2.5 percent GDP growth during the first quarter on an annualized basis, but the actual figure came in at 2.2 percent, and much of the disappointment showed up in the nonresidential construction category.”

Basu notes that this GDP report “extends the string of negative data releases for nonresidential construction activity in America” and that previous releases showed declines in employment, backlog, and construction spending.

“Overall, today’s report was disappointing,” Basu says in his analysis. “The consensus forecast had called for 2.5 percent GDP growth during the first quarter on an annualized basis, but the actual figure came in at 2.2 percent, and much of the disappointment showed up in the nonresidential construction category.”

April 2012 Price Producer Index (PPI) data are scheduled to be released on May 11, 2012, at 8:30 a.m. ET, according to the Bureau of Labor Statistics.

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