Trends in U.S. construction, 1997 to 2001

Construction Review, Spring, 1997

In 1997, the value of new construction put in place will be about $585 billion, which would be an all-time record. Adjusted for inflation it would be a decline of about 1 percent from its 1996 level. The homebuilding sector will account for the entire decline, as an increase in mortgage interest rates other factors. Private nonresidential construction will continue at 1996 levels. Public works construction will increase slightly from 1996, because of increasing Federal Government investment in infrastructure. In addition, shipments of manufactured housing (mobile homes) will increase a further 3 percent, to the highest level in two decades.

Global Construction Trends

The United States is one of the leading construction markets in the world, employing 7.2 million Americans and accounting for about 7 percent of the GDP. Nevertheless, about 80 percent of the world's construction activity is outside of the United States. Enterprising American construction and engineering firms have been successful competitors in the international contracting business, although most of their overseas construction is done by foreign affiliates using local labor rather than by cross-border exports of U.S. services.

The big emerging countries of the Pacific Rim comprise the most booming construction market in the world. However, South America and Europe are also large markets for international contractors, and U.S. exporters have a NAFTA advantage in Canada and Mexico. Although there are substantial difficulties for U.S. firms entering foreign markets, U.S. companies have stepped up their efforts during the 1990s. In 1995 American-based design firms received $5 billion in international billings, while general contractors won $20 billion in foreign contracts.

U.S. exports of construction services, as measured on a cross-border transactions basis, were about $2.6 billion in 1995. The actual value of contracts won by American-owned companies was much larger about $25 billion. The difference is chiefly because cross-border transactions exclude most construction done by foreign affiliates, foreign subcontractors, and foreign labor forces. Legal U.S. imports of construction services were about $0.3 billion, giving the United States a large balance-of-trade surplus in construction services. Most of the U.S. exports of construction services are actually management services, engineering know-how, and specialized technology.

U.S. Construction in 1996

In 1996 the inflation-adjusted value of new construction put in place increased by 3 percent from the near-record level of 1995. (The 1996 current-dollar value of about $570 billion was an all-time record.) This performance was the result of a 7 percent increase in the number of housing starts, to 1.45 million units. The increase in homebuilding was accompanied by small increases in nonresidential construction. In addition, 370,000 manufactured (mobile) homes were shipped, more than double the 1991 level. Public works construction increased 1 percent, led by increases in school construction. Private nonresidential construction increased modestly, with telecommunications, hotels, and electric utilities accounting for most of the gain. (See Table 1).

Table 1: Value of New Construction Put in Place, 1994-2001
(in billions of 1992 dollars except as noted)

Type of Construction         1994    1995     1996     1997     2001

TOTAL NEW CONSTRUCTION      487.9   486.6    502.1    497.8    547.9

Residential                 217.9   207.4    216.9    210.0    246.0
 Single-family              140.4   127.1    134.7    128.0    156.2
 Multi-family                12.8    15.7     17.0     16.1     17.8
 Home Improvement            64.7    64.6     65.2     65.9     72.0

Private Nonresidential      150.1   155.6    160.2    161.0    167.4
 Manufacturing facilities    26.8    28.9     26.9     27.4     31.2
 Office                      20.6    22.6     21.7     21.9     21.7
 Hotels & Motels              4.3     6.4      9.6      9.6     10.6
 Other Commercial            34.8    37.8     39.7     37.7     35.9
 Religious                    3.6     3.9      3.9      4.0      3.9
 Educational                  4.5     4.9      5.3       5.6     5.8
 Hospital & Institutional    11.4    10.0     10.0      10.2    11.6
 Misc. buildings              5.6     5.3      6.4       6.6     6.4
 Telecommunications           9.8     9.8     10.3      10.8    11.9
 Railroads                    3.2     3.0      3.1       3.1     3.1
 Electric utilities          13.9    11.8     12.2      12.6    14.1
 Gas utilities                4.9     4.7      4.8       5.1     4.8
 Petroleum pipelines          0.9     0.8      0.8       0.8     0.8
 Farm structures              3.0     3.1      3.2       3.2     3.2
 Misc. structures             2.8     2.6      2.5       2.3     2.5

Public Works                119.9   123.6    125.0     126.8   134.5
 Housing & redevelopment      4.8     5.4      4.9       5.1     4.9
 Federal industrial           1.4     1.4      1.3       1.3     1.3
 Educational                 21.7    22.9     24.3      25.7    26.8
 Hospital                     3.7     3.9      4.1       4.1     4.3
 Other public buildings      18.4    19.8     20.4      21.2    22.5
 Highways                    36.5    34.9     34.9      34.6    36.7
 Military facilities          2.2     2.7      2.7       2.5     2.3
 Conservation & development   6.0     5.8      5.2       4.8     4.7
 Sewer systems                9.5     9.9     10.1       9.7    11.1
 Water supply                 4.9     5.4      5.6       5.8     6.5
 Misc. public structures     10.8    11.5     11.5      12.1    13.3

                               Percent Change (annual rate)
Type of Construction            95-96    96-97    96-2001

TOTAL NEW CONSTRUCTION              3       -1          2

Residential                         5       -3          3
 Single-family                      6       -5          3
 Multi-family                       8       -5          1
 Home Improvement                   1        1          2

Private Nonresidential              3        0          1
 Manufacturing facilities          -7        2          3
 Office                            -4        1          0
 Hotels & Motels                   50        0          2
 Other Commercial                   5       -5         -2
 Religious                          0        2          *
 Educational                        8        6          2
 Hospital & Institutional           0        2          3
 Misc. buildings                   20        3          *
 Telecommunications                 5        5          3
 Railroads                          2        2          *
 Electric utilities                 3        4          3
 Gas utilities                      3        5          *
 Petroleum pipelines                0        0          *
 Farm structures                    2        2          *
 Misc. structures                  -5       -5          *

Public Works                        1        1          1
 Housing & redevelopment          -10        4          *
 Federal industrial                -5        0          *
 Educational                        6        6          2
 Hospital                           5        0          1
 Other public buildings             3        4          2
 Highways                           0       -1          1
 Military facilities                0       -9         -3
 Conservation & development       -10       -8         -2
 Sewer systems                      2       -4          2
 Water supply                       4        3          3
 Misc. public structures            0        5          3