ACEC Macro Economic Update: Longest-Ever Expansion Ends | Construction Spending Up in March

ACEC News / Industry Statistics

May 4, 2020

ACEC Macro Economic Update: Longest-Ever Expansion Ends | Construction Spending Up in March

First Quarter GDP Numbers Mark End to Longest Economic Expansion

On April 29th the Bureau of Economic Analysis (BEA) reported its “advance” estimate of first-quarter 2020 real gross domestic product (GDP), showing a decrease at an annual rate of 4.8 percent. This is seen as the official end to the longest U.S. economic expansion on record, and the first quarter decline is also the sharpest drop in GDP since 2008. In the previous quarter (fourth quarter of 2019) real GDP increased 2.1 percent.

Healthcare spending accounted for nearly half the drop in first-quarter GDP. Some may think this is surprising—since we are in a public health crisis—however, there has been little spending on elective and routine health care services, and health care spending makes up 17.7 percent of our nation’s GDP, according to the U.S. Centers for Medicare & Medicaid Services.

These GDP numbers are expected to drop significantly in the second quarter. The first-quarter numbers only reflect a few weeks in March when the COVID-19 pandemic began to impact the U.S. economy. President Trump declared a national emergency on March 13th; California’s governor issued the first stay-at-home order on March 19th, followed by most other states.

March Construction Spending Rises, but Drop is Expected

Construction spending in March rose over February, according to the U.S. Census Bureau’s monthly report, but April is expected to show a decline, according to industry experts.

March construction spending was reported at $1.361 trillion annualized and seasonally adjusted, up 0.9 percent from $1.348 trillion in February, and up 4.7 percent compared to March 2019. First-quarter construction spending was estimated at $297.0 billion, 6.7 percent above the first quarter of 2019 at $278.5 billion.

Most of the growth in March can be attributed to residential construction spending, which was up 2.3 percent from February. This residential construction growth does not reflect the collapse in housing starts and sales captured in other Census reports in late March and April, and the general sense that the housing market will slow dramatically due to prospective homebuyers unemployment and recession concerns.

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