Economy Watch: Nonresidential Construction Activity Still Brisk

The continued expansion in nonresidential fixed investment signals that growth in business outlays supports the ongoing economic recovery, according to Associated Builders and Contractors.

Nonresidential fixed investment, a category of GDP including nonresidential construction activity, expanded at a 5.2 percent seasonally adjusted annual rate. Source: Associated Builders and Contractors
Nonresidential fixed investment, a category of GDP including nonresidential construction activity, expanded at a 5.2 percent seasonally adjusted annual rate. Source: Associated Builders and Contractors

Nonresidential fixed investment, a part of the U.S. economy that includes nonresidential construction activity, expanded at a 5.2 percent annualized rate during the second quarter of 2017, according to the Bureau of Economic Analysis’ report late last week. That follows a 7.2 percent expansion during the first quarter.

The continued expansion in nonresidential fixed investment indicates that growth in business outlays support the ongoing economic recovery, now in its ninth year, according to Associated Builders and Contractors. The expansion of nonresidential fixed investment contributed more than sixth-tenths of a percentage point to GDP growth.

Equipment investment

This was due in large measure to an increase in investment in construction equipment. The other two components of nonresidential fixed investment—investment in structures and intellectual property—also expanded, but at a slower pace.

“This was a good report from the perspective of the nation’s nonresidential construction firms, particularly those primarily engaged in private as opposed to public construction,” said ABC Chief Economist Anirban Basu. “The uptick in investment in construction equipment is particularly noteworthy because it signals a general belief that construction activity will continue to recover in America.”