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Construction Comprises Nearly 4 Percent of GDP09-07-16 | Economic News

Construction Comprises Nearly 4 Percent of GDP
Private Sector Building Activity Up In 30 States

Private construction projects, including both the residential and nonresidential sectors, contributed 3.9 percent to the U.S. gross domestic product in 2015, the Associated Builders and Contractors said.

The private construction industry contributed nearly 4 percent to the nation's gross domestic product in 2015, according to Associated Builders and Contractors.

Construction increased in 30 states during the year, stayed the same in 14 states and declined in just six states. That pushed the industry's total contribution up 0.1 percent, compared to 2014, to 3.9 percent.

Private construction includes both residential and nonresidential building activity.

"Construction continued to play a vital role in the U.S. economy in 2015," said Bernard M. Markstein, president and chief economist of Markstein Advisors, the company that analyzed the data for the ABC.

Construction accounted for 5.1 percent of the nation's GDP in 2010 and 2011, and 6 percent of GDP in 2014 and 2015. Gross domestic product is the value of all finished goods and services produced within a country's borders in a specific time period. GDP is a broad measure of a nation's overall economic activity.

"The industry continues to experience growth following the Great Recession, led by investment in lodging, office, manufacturing and multifamily construction," Markstein said. "The recovery is being led by consumers who have benefited from improved job markets, increased income and low energy prices, and who are spending their increases in disposable income."

In terms of construction's share of individual states' GDP, North Dakota led the nation at 7.7 percent. Hawaii was second at 5.9 percent, followed by Montana's 5.8 percent, Wyoming at 5.7 percent, and Louisiana at 5.5 percent.

Connecticut and New York shared the lowest contribution of state GDP for the third year in a row at 3.1 percent. Delaware was third lowest at 3.2 percent. Oregon was fourth lowest at 3.3 percent. Six states "?u California, Illinois, New Hampshire, New Mexico, North Carolina and Ohio "?u tied for fifth lowest at 3.4 percent.

Residential construction was strong in 2015. The multifamily sector has returned to normal, and the single-family industry performed well but continued to be hampered with certain issues.

"The still-prevalent fear of owning among many, along with relatively tight mortgage lending standards, acts as a drag on demand for single-family housing," the ABC said. "Many builders, mostly small builders, also find it difficult to obtain financing, have few developed lots to work with and have difficulty finding sufficient skilled labor."

All of these factors limited the ability of builders to provide new homes at prices buyers could afford.

"Nonetheless, single-family housing construction activity has been and remains strong, although working off a fairly low base, not having fully recovered from the housing recession," the ABC said. "Overall, single-family construction is still well below the nation's long-term, ongoing needs. On a positive note, this leaves significant room for growth without creating a new housing bubble."

On the nonresidential front, the lodging, office and manufacturing sectors performed well in 2015. Growth in the commercial sector, mostly retail, slowed significantly, while communications-related projects surged.